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title-10a•Title 10A — Alabama Business and Nonprofit Entities Code
title-10aAla. Code tit. 10ACodeJan 1, 1900
This title shall be known and may be cited as the “Alabama Business and Nonprofit Entity Code.”
(Act 2009-513, p. 967, §2.)
(a) All provisions of this chapter shall apply to all entities formed pursuant to or governed by Chapters 2A to 11, inclusive, and Chapters 17 and 18, except as set forth in this chapter and except as set forth in subsections (c), (d), and (e).
(b) The provisions of this chapter shall apply to entities formed pursuant to or governed by Chapter 16, Chapter 20, and Chapter 30 only as provided therein or expressly provided in this chapter.
(c) If a provision of this chapter conflicts with a provision in another chapter of this title, the provision of the other chapter, to the extent of the conflict, supersedes the provision of this chapter.
(d) Provisions in another chapter may provide that the provisions of this chapter do not apply by specifically providing which provisions in this chapter do not apply.
(e) Provisions in another chapter may provide that the governing documents of an entity governed by that other chapter may supersede the provisions of this chapter by specifically providing which provisions in this chapter may be superseded by those governing documents.
(Act 2009-513, p. 967, §2; Act 2018-125, §1; Act 2019-94, §2; Act 2020-73, §1; Act 2021-299, §1; Act 2025-281, §1.)
(a) If a term, including a term that is defined in subsection (b), is defined in a chapter of this title, then, when used in that chapter, the term shall have the meaning set forth in that chapter.
(b) As used in this title, except as provided in subsection (a) or where the context otherwise requires, the following terms mean:
(1) AFFILIATE. A person who controls, is controlled by, or is under common control with another person. An affiliate of an individual includes the spouse, or a parent or sibling thereof, of the individual, or a child, grandchild, sibling, parent, or spouse of any thereof, of the individual, or an individual having the same home as the individual, or a trust or estate of which an individual specified in this sentence is a substantial beneficiary; a trust, estate, incompetent, conservatee, protected person, or minor of which the individual is a fiduciary; or an entity of which the individual is director, general partner, agent, employee or the governing authority or member of the governing authority.
(2) ASSOCIATE. When used to indicate a relationship with:
(A) a domestic or foreign entity for which the person is:
(i) an officer or governing person; or
(ii) a beneficial owner of 10 percent or more of a class of voting ownership interests or similar securities of the entity;
(B) a trust or estate in which the person has a substantial beneficial interest or for which the person serves as trustee or in a similar fiduciary capacity;
(C) the person’s spouse or a relative of the person related by consanguinity or affinity within the fifth degree who resides with the person; or
(D) a governing person or an affiliate or officer of the person.
(3) ASSOCIATION. Includes, but is not limited to, an unincorporated nonprofit association as defined in Chapter 17 and an unincorporated professional association as defined in Article 1 of Chapter 30.
(4) BENEFIT CORPORATION. A benefit corporation as defined in Chapter 2A.
(5) BUSINESS CORPORATION. A corporation or foreign corporation as defined in Chapter 2A. The term includes a benefit corporation as defined in Chapter 2A.
(6) BUSINESS TRUST. A business trust as defined in Chapter 16.
(7) CERTIFICATE OF DISSOLUTION. Any document such as a certificate of dissolution, statement of dissolution, or articles of dissolution, required or permitted to be filed publicly with respect to an entity’s dissolution and winding up of its business, activity, activities, not for profit activity, or affairs.
(8) CERTIFICATE OF FORMATION.
(A) The document required to be filed publicly under this title to form a filing entity; and
(B) if appropriate, a restated certificate of formation and all amendments of an original or restated certificate of formation; provided that a restated certificate of formation and an amendment of an original or restated certificate of formation shall not be deemed to be a certificate of formation for purposes of Section 10A-1-4.31.
(9) CERTIFICATE OF OWNERSHIP. An instrument evidencing an ownership interest or membership interest in an entity.
(10) CERTIFICATED OWNERSHIP INTEREST. An ownership interest of a domestic entity represented by a certificate.
(11) CERTIFICATION or CERTIFIED. Duly authenticated by the proper officer or filing officer of the jurisdiction the laws of which govern the internal affairs of an entity.
(12) CONTRIBUTION. A tangible or intangible benefit that a person transfers to an entity in consideration for an ownership interest in the entity or otherwise in the person’s capacity as an owner or a member. A benefit that may constitute a contribution transferred in exchange for an ownership interest or transferred in the transferor’s capacity as an owner or member may include cash, property, services rendered, a contract for services to be performed, a promissory note or other obligation of a person to pay cash or transfer property to the entity, or securities or other interests in or obligations of an entity. In either case, the benefit does not include cash or property received by the entity:
(A) with respect to a promissory note or other obligation to the extent that the agreed value of the note or obligation has previously been included as a contribution; or
(B) that the person intends to be a loan to the entity.
(13) CONVERSION. A conversion, whether referred to as a conversion, domestication, or otherwise, means:
(A) the continuance of a domestic entity as a foreign entity of any type;
(B) the continuance of a foreign entity as a domestic entity of any type; or
(C) the continuance of a domestic entity of one type as a domestic entity of another type.
(14) CONVERTED ENTITY. An entity resulting from a conversion.
(15) CONVERTING ENTITY. An entity as the entity existed before the entity’s conversion.
(16) COOPERATIVE. Includes an employee cooperative as defined in Chapter 11.
(17) CORPORATION. Includes a domestic or foreign business corporation, including a benefit corporation, as defined in Chapter 2A, a domestic or foreign nonprofit corporation as defined in Chapter 3A, a domestic or foreign professional corporation as defined in Chapter 4, and those entities specified in Chapter 20 as corporate.
(18) COURT. The designated court, and if none, the circuit court specifically set forth in this title, and if none, any other court having jurisdiction in a case.
(19) DAY. When used in the computation of time, excludes the first day and includes the last day of the period so computed, unless the last day is a Saturday, Sunday, or legal holiday, in which event the period runs until the end of the next day that is not a Saturday, a Sunday, or a legal holiday. When the period of time to be computed is less than 7 days, intermediate Saturdays, Sundays, and legal holidays shall be excluded.
(20) DEBTOR IN BANKRUPTCY. A person who is the subject of:
(A) an order for relief under the United States bankruptcy laws, Title 11, United States Code, or comparable order under a successor statute of general application; or
(B) a comparable order under federal, state, or foreign law governing insolvency.
(21) DESIGNATED COURT. The court or courts that are designated in the (i) certificate of incorporation or bylaws of a corporation as authorized by Chapter 2A, (ii) certificate of incorporation or bylaws of a nonprofit corporation as authorized by Chapter 3A, (iii) limited liability company agreement of a limited liability company formed pursuant to or governed by Chapter 5A, (iv) partnership agreement of a partnership formed pursuant to or governed by Chapter 8A, or (v) limited partnership agreement of a limited partnership formed pursuant to or governed by Chapter 9A.
(22) DIRECTOR. An individual who serves on the board of directors, by whatever name known, of a foreign or domestic corporation.
(23) DISTRIBUTION. A transfer of property, including cash, from an entity to an owner or member of the entity in the owner’s or member’s capacity as an owner or member. The term includes a dividend, a redemption or purchase of an ownership interest, or a liquidating distribution.
(24) DOMESTIC. With respect to an entity, means governed as to its internal affairs by this title.
(25) DOMESTIC ENTITY. An entity governed as to its internal affairs by this title.
(26) EFFECTIVE DATE OF THIS TITLE. January 1, 2011.
(27) ELECTRONIC. Relating to technology having electrical, digital, magnetic, wireless, optical, electromagnetic, or similar capabilities.
(28) ELECTRONIC SIGNATURE. An electronic signature as that term is defined in the Uniform Electronic Transactions Act, Chapter 1A of Title 8, or any successor statute.
(29) ELECTRONIC TRANSMISSION OR ELECTRONICALLY TRANSMITTED. Any form or process of communication not directly involving the physical transfer of paper or another tangible medium, which (i) is suitable for the retention, retrieval, and reproduction of information by the recipient, and (ii) is retrievable in paper form by the recipient through an automated process used in conventional commercial practice.
(30) ELECTRONIC WRITING. Information that is stored in an electronic or other nontangible medium and is retrievable in paper form through an automated process used in conventional commercial practice.
(31) ENTITY. A domestic or foreign organization.
(32) FILING ENTITY. A domestic entity that is a corporation, limited partnership, limited liability limited partnership, limited liability company, professional association, employee cooperative corporation, or real estate investment trust.
(33) FILING INSTRUMENT. An instrument, document, or statement that is required or permitted by this title to be delivered for filing by or for an entity to a filing officer.
(34) FILING OFFICER. An officer of this state with whom a filing instrument is required or permitted to be delivered for filing pursuant to this title.
(35) FOREIGN. With respect to an entity, means governed as to its internal affairs by the laws of a jurisdiction other than this state.
(36) FOREIGN ENTITY. An entity governed as to its internal affairs by the laws of a jurisdiction other than this state.
(37) FOREIGN FILING ENTITY. A foreign entity that registers or is required to register as a foreign entity under Article 7.
(38) FOREIGN GOVERNMENTAL AUTHORITY. A governmental official, agency, or instrumentality of a jurisdiction other than this state.
(39) FOREIGN NONFILING ENTITY. A foreign entity that is not a foreign filing entity.
(40) GENERAL PARTNER.
(A) Each partner in a general partnership; or
(B) a person who is admitted to a limited partnership as a general partner in accordance with the governing documents of the limited partnership.
(41) GENERAL PARTNERSHIP. A partnership as defined in Chapter 8A. The term includes a limited liability partnership as defined in Chapter 8A.
(42) GOVERNING AUTHORITY. A person or group of persons who are entitled to manage and direct the affairs of an entity pursuant to this title and the governing documents of the entity, except that if the governing documents of the entity or this title divide the authority to manage and direct the affairs of the entity among different persons or groups of persons according to different matters, governing authority means the person or group of persons entitled to manage and direct the affairs of the entity with respect to a matter under the governing documents of the entity or this title. The term includes the board of directors of a corporation, by whatever name known, or other persons authorized to perform the functions of the board of directors of a corporation, the general partners of a general partnership or limited partnership, the persons who have direction and oversight of a limited liability company, and the trust managers of a real estate investment trust. The term does not include an officer who is acting in the capacity of an officer.
(43) GOVERNING DOCUMENTS.
(A) In the case of a domestic entity:
(i) the certificate of formation for a filing entity or the document or agreement under which a nonfiling entity is formed; and
(ii) the other documents or agreements, including bylaws, partnership agreements of partnerships, limited liability company agreements of limited liability companies, or similar documents, adopted by the entity pursuant to this title to govern the formation or the internal affairs of the entity; or
(B) in the case of a foreign entity, the instruments, documents, or agreements adopted under the law of its jurisdiction of formation to govern the formation or the internal affairs of the entity.
(44) GOVERNING PERSON. A person serving as part of the governing authority of an entity.
(45) INDIVIDUAL. A natural person and the estate of an incompetent or deceased natural person.
(46) INSOLVENCY. The inability of a person to pay the person’s debts as they become due in the usual course of business or affairs.
(47) INSOLVENT. A person who is unable to pay the person’s debts as they become due in the usual course of business or affairs.
(48) JUDGE OF PROBATE. The judge of probate of the county in which an entity is required or permitted to deliver a filing instrument for filing pursuant to this title.
(49) JURISDICTION OF FORMATION.
(A) In the case of a filing entity, this state;
(B) in the case of a foreign entity, the jurisdiction in which the entity’s certificate of formation or similar organizational instrument is filed, or if no certificate of formation or similar organizational instrument is filed, then the laws of the jurisdiction which govern the internal affairs of the foreign entity;
(C) in the case of a general partnership which has filed a statement of partnership, a statement of not for profit partnership, or a statement of limited liability partnership in accordance with Chapter 8A, in this state;
(D) in the case of a foreign limited liability partnership, the laws of the jurisdiction which govern the filing of the foreign limited liability partnership’s statement of limited liability partnership or such filing in that jurisdiction; and
(E) in the case of a foreign or domestic nonfiling entity other than those entities described in subsection (C) or (D):
(i) the jurisdiction the laws of which are chosen in the entity’s governing documents to govern its internal affairs if that jurisdiction bears a reasonable relation to the owners or members or to the domestic or foreign nonfiling entity’s business, activities, and affairs under the principles of this state that otherwise would apply to a contract among the owners or members; or
(ii) if subparagraph (i) does not apply, the jurisdiction in which the entity has its principal office.
(50) LAW. Unless the context requires otherwise, both statutory and common law.
(51) LICENSE. A license, certificate of registration, or other legal authorization.
(52) LICENSING AUTHORITY. The state court, state regulatory licensing board, or other like agency which has the power to issue a license or other legal authorization to render professional services.
(53) LIMITED LIABILITY COMPANY. A limited liability company as defined in Chapter 5A.
(54) LIMITED LIABILITY LIMITED PARTNERSHIP. A limited liability limited partnership as defined in Chapter 9A.
(55) LIMITED LIABILITY PARTNERSHIP. A limited liability partnership as defined in Chapter 8A.
(56) LIMITED PARTNER. A person who has been admitted to a limited partnership as a limited partner as provided by:
(A) in the case of a domestic limited partnership, Chapter 9A; or
(B) in the case of a foreign limited partnership, the laws of its jurisdiction of formation.
(57) LIMITED PARTNERSHIP. A limited partnership as defined in Chapter 9A. The term includes a limited liability limited partnership as defined in Chapter 9A.
(58) MANAGERIAL OFFICIAL. An officer or a governing person.
(59) MEMBER.
(A) A person defined as a member under Chapter 5A;
(B) in the case of a nonprofit corporation formed pursuant to or governed by Chapter 3A, a person defined as a member under Chapter 3A;
(C) in the case of an employee cooperative corporation formed pursuant to or governed by Chapter 11, a natural person who, as provided in Chapter 11, has been accepted for membership in and owns a membership share in an employee cooperative;
(D) in the case of a nonprofit association, a person who, as provided in Chapter 17, may participate in the selection of persons authorized to manage the affairs of the nonprofit association or in the development of its policy.
(60) MERGER. The combination of one or more domestic entities with one or more domestic entities or foreign entities resulting in:
(A) one or more surviving domestic entities or foreign entities;
(B) the creation of one or more new domestic entities or foreign entities, or one or more surviving domestic entities or foreign entities; or
(C) one or more surviving domestic entities or foreign entities and the creation of one or more new domestic entities or foreign entities.
(61) NONFILING ENTITY. A domestic entity that is not a filing entity. The term includes a domestic general partnership, a limited liability partnership, and a nonprofit association.
(62) NONPROFIT ASSOCIATION. An unincorporated nonprofit association as defined in Chapter 17. The term does not include a general partnership which has filed a statement of not for profit partnership in accordance with Chapter 8A, a limited partnership which is carrying on a not for profit purpose, or a limited liability company which is carrying on a not for profit purpose.
(63) NONPROFIT CORPORATION. A domestic or foreign nonprofit corporation as defined in Chapter 3A.
(64) NONPROFIT ENTITY. An entity that is a nonprofit corporation, nonprofit association, or other entity that is organized solely for one or more nonprofit purposes.
(65) OFFICER. An individual elected, appointed, or designated as an officer of an entity by the entity’s governing authority or under the entity’s governing documents.
(66) ORGANIZATION. A corporation, limited partnership, general partnership, limited liability company, business trust, real estate investment trust, joint venture, joint stock company, cooperative, association, or other organization, including, regardless of its organizational form, a bank, insurance company, credit union, and savings and loan association, whether for profit, not for profit, nonprofit, domestic, or foreign.
(67) ORGANIZER. A person, who need not be an owner or member of the entity, who, having the capacity to contract, is authorized to execute documents in connection with the formation of the entity. The term includes an incorporator.
(68) OWNER.
(A) With respect to a foreign or domestic business corporation or real estate investment trust, a stockholder or a shareholder;
(B) with respect to a foreign or domestic partnership, a partner;
(C) with respect to a foreign or domestic limited liability company or association, a member; and
(D) with respect to another foreign or domestic entity, an owner of an equity interest in that entity.
(69) OWNERSHIP INTEREST. An owner’s interest in an entity. The term includes the owner’s share of profits and losses or similar items and the right to receive distributions. The term does not include an owner’s right to participate in management or participate in the direction or oversight of the entity. An ownership interest is personal property.
(70) PARENT OR PARENT ENTITY. An entity that:
(A) owns at least 50 percent of the ownership or membership interest of a subsidiary; or
(B) possesses at least 50 percent of the voting power of the owners or members of a subsidiary.
(71) PARTNER. A limited partner or general partner.
(72) PARTNERSHIP. Includes a general partnership, a limited liability partnership, a foreign limited liability partnership, a limited partnership, a foreign limited partnership, a limited liability limited partnership, and a foreign limited liability limited partnership.
(73) PARTNERSHIP AGREEMENT. Any agreement (whether referred to as a partnership agreement or otherwise), written, oral, or implied, of the partners as to the activities and affairs of a general partnership or a limited partnership. The partnership agreement includes any amendments to the partnership agreement. In the case of limited partnerships formed prior to October 1, 1998, partnership agreement includes the certificate of partnership.
(74) PARTY TO THE MERGER. A domestic entity or foreign entity that under a plan of merger is combined by a merger. The term does not include a domestic entity or foreign entity that is not to be combined into or with one or more domestic entities or foreign entities, regardless of whether ownership interests of the entity are to be issued under the plan of merger.
(75) PERSON. An individual, including the estate of an incompetent or deceased individual, or an entity, whether created by the laws of this state or another state or foreign country, including, without limitation, a general partnership, limited liability partnership, limited partnership, limited liability limited partnership, limited liability company, corporation, professional corporation, nonprofit corporation, professional association, trustee, personal representative, fiduciary, as defined in Section 19-3-150 or person performing in any similar capacity, business trust, estate, trust, association, joint venture, government, governmental subdivision, agency, or instrumentality, or any other legal or commercial entity.
(76) PRESIDENT.
(A) The individual designated as president of an entity under the entity’s governing documents; or
(B) the officer or committee of persons authorized to perform the functions of the principal executive officer of an entity without regard to the designated name of the officer or committee.
(77) PRINCIPAL OFFICE. The office, in or out of this state, where the principal executive office, whether referred to as the principal executive office, chief executive office, or otherwise, of an entity is located.
(78) PROFESSIONAL ASSOCIATION. A professional association as defined in Chapter 30.
(79) PROFESSIONAL CORPORATION. A domestic or foreign professional corporation as defined in Chapter 4.
(80) PROFESSIONAL ENTITY. A professional association and a professional corporation.
(81) PROFESSIONAL SERVICE. Any type of service that may lawfully be performed only pursuant to a license issued by a state court, state regulatory licensing board, or other like agency pursuant to state laws.
(82) PROPERTY. Includes all property, whether real, personal, or mixed, or tangible or intangible, or any right or interest therein.
(83) REAL ESTATE INVESTMENT TRUST. An unincorporated trust, association, or other entity as defined in Chapter 10.
(84) SECRETARY.
(A) The individual designated as secretary of an entity under the entity’s governing documents; or
(B) the officer or committee of persons authorized to perform the functions of secretary of an entity without regard to the designated name of the officer or committee.
(85) SECRETARY OF STATE. The Secretary of State of the State of Alabama.
(86) SIGN or SIGNATURE. With the present intent to authenticate or adopt a writing:
(A) to execute or adopt a tangible symbol to a writing, and includes any manual, facsimile, or conformed signature; or
(B) to attach to or logically associate with an electronic transmission an electronic sound, symbol, or process, and includes an electronic signature in an electronic transmission.
(87) STATE. Includes, when referring to a part of the United States, a state or commonwealth, and its agencies and governmental subdivisions, and a territory or possession, and its agencies and governmental subdivisions, of the United States.
(88) SUBSCRIBER. A person who agrees with or makes an offer to an entity to purchase by subscription an ownership interest in the entity.
(89) SUBSCRIPTION. An agreement between a subscriber and an entity, or a written offer made by a subscriber to an entity before or after the entity’s formation, in which the subscriber agrees or offers to purchase a specified ownership interest in the entity.
(90) SUBSIDIARY. An entity at least 50 percent of:
(A) the ownership or membership interest of which is owned by a parent entity; or
(B) the voting power of which is possessed by a parent entity.
(91) TREASURER.
(A) The individual designated as treasurer of an entity under the entity’s governing documents; or
(B) the officer or committee of persons authorized to perform the functions of treasurer of an entity without regard to the designated name of the officer or committee.
(92) TRUSTEE. A person who serves as a trustee of a trust, including a real estate investment trust.
(93) UNCERTIFICATED OWNERSHIP INTEREST. An ownership interest in a domestic entity that is not represented by a certificate.
(94) VICE PRESIDENT.
(A) The individual designated as vice president of an entity under the governing documents of the entity; or
(B) the officer or committee of persons authorized to perform the functions of the president of the entity on the death, absence, or resignation of the president or on the inability of the president to perform the functions of office without regard to the designated name of the officer or committee.
(95) WRITING or WRITTEN. Information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.
(Act 2009-513, p. 967, §2; Act 2014-144, p. 265, §2; Act 2016-379, p. 934, §2; Act 2018-125, §1; Act 2019-94, §2; Act 2020-73, §1; Act 2021-299, §1; Act 2023-503, §2; Act 2024-413, §1.)
(a) This section shall not apply to Chapters 2A, 3A, 4, and 11. In addition, provisions in a written limited liability company agreement under Chapter 5A, a written partnership agreement under Chapter 8A, and a written limited partnership agreement under Chapter 9A may provide that this section is not applicable.
(b) Except as provided in subsection (a), for purposes of this title, a person is disinterested with respect to the approval of a contract, transaction, or other matter or to the consideration of the disposition of a claim or challenge relating to a contract, transaction, or particular conduct, if the person or the person’s associate:
(1) is not a party to the contract or transaction or materially involved in the conduct that is the subject of the claim or challenge; and
(2) does not have a material financial interest in the outcome of the contract or transaction or the disposition of the claim or challenge.
(c) For purposes of subsection(b), a person is not materially involved in the conduct that is the subject of a claim or challenge and does not have a material financial interest in the outcome of a contract or transaction or the disposition of a claim or challenge solely because:
(1) the person was nominated or elected as a governing person by a person who is:
(A) interested in the contract or transaction; or
(B) alleged to have engaged in the conduct that is the subject of the claim or challenge;
(2) the person receives normal fees or customary compensation, reimbursement for expenses, or benefits as a governing person of the entity;
(3) the person has a direct or indirect equity interest in the entity;
(4) the entity has, or its subsidiaries have, an interest in the contract or transaction or was affected by the alleged conduct;
(5) the person or an associate of the person receives ordinary and reasonable compensation for reviewing, making recommendations regarding, or deciding on the disposition of the claim or challenge; or
(6) in the case of a review by the person of the alleged conduct that is the subject of the claim or challenge:
(A) the person is named as a defendant in the derivative proceeding regarding the matter or as a person who engaged in the alleged conduct; or
(B) the person, acting as a governing person, approved, voted for, or acquiesced in the act being challenged if the act did not result in a material personal or financial benefit to the person and the challenging party fails to allege particular facts that, if true, raise a significant prospect that the governing person would be held liable to the entity or its owners or members as a result of the conduct.
(Act 2009-513, p. 967, §2; Act 2026-495, §1.)
In this title, required information is conspicuous if the information is placed in a manner or displayed using a font that provides or is intended to provide notice to a reasonable person affected by the information. Required information in a document is conspicuous if the font used for the information is capitalized, boldfaced, italicized, or underlined or larger or of a different color than the remainder of the document.
(Act 2009-513, p. 967, §2.)
To the extent not inconsistent with the Constitution of Alabama of 1901, and other statutes of this state wherein the terms may be found, and as the context requires, in this title or any other statute of this state:
(1) a reference to certificate of formation includes, in the case of a corporation, articles of incorporation, certificate of incorporation, and charter; in the case of limited partnership, a certificate of limited partnership and a certificate of formation; in the case of a limited liability company, certificate of formation and articles of organization; and in the case of a business trust or a real estate investment trust, declaration of trust and, similarly, a reference to articles of incorporation, certificate of incorporation, charter, certificate of limited partnership, or articles of organization includes a certificate of formation;
(2) a reference to articles of dissolution includes statement of dissolution and certificate of dissolution, and similarly a reference to statement of dissolution includes articles of dissolution and certificate of dissolution, and similarly, a reference to certificate of dissolution includes articles of dissolution and statement of dissolution;
(3) a reference to certificate of merger includes articles of merger and statement of merger and similarly, a reference to articles of merger includes certificate of merger and statement of merger, and similarly, a reference to statement of merger includes certificate of merger and articles of merger;
(4) a reference to authorized capital stock includes authorized shares;
(5) a reference to capital stock includes authorized and issued shares, issued shares, and stated capital;
(6) a reference to a certificate of registration, certificate of authority, statement of foreign limited liability partnership, and permit to transact business includes registration;
(7) a reference to stock and shares of stock includes shares;
(8) a reference to stockholder includes shareholder; and
(9) a reference to no par stock includes shares without par value.
(Act 2009-513, p. 967, §2; Act 2016-379, p. 934, §2; Act 2018-125, §1.)
For purposes of this title, a writing has been signed by a person when the writing includes the person’s signature. A transmission or reproduction of a writing signed by a person is considered signed by that person for purposes of this title.
(Act 2009-513, p. 967, §2.)
(a) The provisions of this title as described by this section may be cited as provided by this section.
(b) Chapter 2A and the provisions of Chapter 1 to the extent applicable to business corporations may be cited as the Alabama Business Corporation Law.
(c) Chapter 3A and the provisions of Chapter 1 to the extent applicable to nonprofit corporations may be cited as the Alabama Nonprofit Corporation Law.
(d) Chapter 4 and the provisions of Chapter 1 to the extent applicable to professional corporations may be cited as the Alabama Professional Corporation Law.
(e) Chapter 5A and the provisions of Chapter 1 to the extent applicable to limited liability companies may be cited as the Alabama Limited Liability Company Law.
(f) Chapter 8A and the provisions of Chapter 1 to the extent applicable to general partnerships may be cited as the Alabama Partnership Law.
(g) Chapter 9A and the provisions of Chapter 1 to the extent applicable to limited partnerships may be cited as the Alabama Limited Partnership Law.
(h) Chapter 10 and the provisions of Chapter 1 to the extent applicable to real estate investment trusts may be cited as the Alabama Real Estate Investment Trust Law.
(i) Chapter 11 and the provisions of Chapter 1 and Chapter 2A to the extent applicable to employee cooperative corporations may be cited as the Alabama Employee Cooperative Corporations Law.
(j) Chapter 17 and the provisions of Chapter 1 to the extent applicable to unincorporated nonprofit associations may be cited as the Alabama Unincorporated Nonprofit Association Law.
(k) Chapter 18 and the provisions of Chapter 1 to the extent applicable to Alabama statewide trade associations may be cited as the Alabama Statewide Trade Association Law.
(Act 2009-513, p. 967, §2; Act 2014-144, p. 265, §2; Act 2016-379, p. 934, §2; Act 2018-125, §1; Act 2019-94, §2; Act 2020-73, §1; Act 2023-503, §2; Act 2024-413, §1; Act 2025-281, §1.)
A reference in a law to a statute or a part of a statute revised by this title is considered to be a reference to the part of this title that revises that statute or part of that statute.
(Act 2009-513, p. 967, §2.)
The Alabama Legislature has power to amend or repeal all or any part of this title at any time, and all domestic or foreign entities subject to this title are governed by the amendment or repeal.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-1.02; amended and renumbered by Act 2009-513, p. 967, §3.)
(a) It is important to the economy of this state, and to domestic entities, their governing authorities, governing persons, officers, and their owners, employees, creditors, and other constituencies, for the laws governing domestic entities to be clear and comprehensible, and to be applied using the plain meaning of the statute.
(b) A domestic entity, whether a filing entity or a nonfiling entity, is governed by the laws of this state regarding (i) the formation and internal affairs of the domestic entity; and (ii) the rights, privileges, powers, duties, and liabilities, if any, of its governing authorities, governing persons, officers, and owners.
(c) If the formation of an entity occurs when a certificate of formation or similar instrument filed with a foreign governmental authority takes effect, the laws of the state or other jurisdiction in which that foreign governmental authority is located governs (i) the formation and internal affairs of the entity, (ii) the duties and obligations of the governing authorities, governing persons, officers, and owners, and (iii) the liability of its owners.
(d) The governing authorities, governing persons, and officers of a domestic entity, in exercising their duties under this title, may be informed by the laws and judicial decisions of other jurisdictions and the practices observed by entities in any other jurisdiction, but the failure or refusal of a governing authority, governing person, or officer to consider, or to conform the exercise of its, his, or her powers to, the laws, judicial decisions, or practices of another jurisdiction shall not constitute or indicate a breach of a duty.
(Act 2009-513, p. 967, §5; Act 2026-495, §1.)
For entities other than general partnerships, if the formation of an entity does not occur when a certificate of formation or similar instrument filed with the filing officer, or with a foreign governmental authority takes effect, the law governing the entity’s formation and internal affairs is the law of the entity’s jurisdiction of formation.
(Act 2009-513, p. 967, §5; Act 2018-125, §1; Act 2019-94, §2.)
For purposes of this title, the internal affairs of an entity include, without limitation:
(1) the rights, powers, and duties of its governing authority, governing persons, officers, owners, and members;
(2) matters relating to its membership or ownership interests; and
(3) matters which are peculiar to the relationships among or between the entity and its governing authority, governing persons, officers, owners, and members.
(Act 2009-513, p. 967, §5; Act 2026-495, §1.)
A domestic entity may have any lawful purpose or purposes, unless otherwise provided by this title. If the purpose for which it is organized or its form makes it subject to a special provision of law or limitation of purpose, the entity shall also comply with that provision or conform to that limitation.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-3.01; amended and renumbered by Act 2009-513, p. 967, §7.)
A domestic entity may not engage in a business, activity, not for profit activity, or any other activity, whether or not for profit, that:
(A) is expressly unlawful or prohibited by a law of this state;
(B) cannot lawfully be engaged in by that entity under a law of this state; or
(C) may not be engaged in by an entity without first obtaining a license under the laws of this state to engage in that business, activity, not for profit activity, or any other activity, whether or not for profit, and a license cannot lawfully be granted to the entity.
(Act 2009-513, p. 967, §8; Act 2018-125, §1.)
Except as provided in the chapter of this title applicable to the entity, a professional entity may engage in only:
(1) one type of professional service, unless the entity is expressly authorized to provide more than one type of professional service under state law regulating the professional services; and
(2) services ancillary to that type of professional service.
(Act 2009-513, p. 967, §8.)
The governing documents of a domestic entity may contain limitations on the entity’s purposes.
(Act 2009-513, p. 967, §8.)
Except as otherwise provided by this title, and whether or not expressly stated in its governing documents, a domestic entity has the same powers as an individual to take action necessary or convenient to carry out its business and affairs. Except as otherwise provided by this title or the governing documents of the entity, the powers of a domestic entity include the power to:
(1) sue, be sued, complain and defend suit in its entity name;
(2) have and alter a seal and use the seal or a facsimile of it by impressing, affixing, or reproducing it;
(3) purchase, lease, or otherwise acquire, receive, own, hold, improve, use, and deal in and with property or an interest in property;
(4) sell, convey, mortgage, pledge, lease, exchange, and otherwise dispose of property;
(5) make contracts and guaranties;
(6) incur liabilities, borrow money, issue notes, bonds, and other obligations which may be convertible into or include the option to purchase other securities or ownership interests in the entity, and secure any obligations, or the obligations of others for whom it can make guarantees, whether or not a guarantee is made, by mortgaging or pledging its property, franchises, or income;
(7) lend money, invest its funds, and receive and hold property as security for repayment;
(8) acquire its own bonds, debentures, or other evidences of indebtedness or obligations;
(9) acquire its own ownership interests, regardless of whether redeemable, and hold the ownership interests as treasury ownership interests or cancel or dispose of the ownership interests;
(10) be a promoter, organizer, owner, partner, member, associate, or manager of an organization;
(11) acquire, receive, own, hold, vote, use, pledge, and dispose of ownership interests in or securities issued by another person;
(12) conduct its business, locate its offices, and exercise the powers granted by this title to further its purposes, in or out of this state;
(13) lend money to, and otherwise assist, its managerial officials, owners, members, or employees as necessary or appropriate, provided, however, a nonprofit entity shall not have the power to lend money to its officers or directors;
(14) elect or appoint governing persons, officers, and agents of the entity, establish the length of their terms, define their duties, and fix their compensation;
(15) pay pensions and establish pension plans, pension trusts, profit sharing plans, share bonus plans, and incentive plans for managerial officials, owners, members, or employees or former managerial officials, owners, members, or employees;
(16) indemnify and maintain liability insurance for managerial officials, owners, members, employees, and agents of the entity or the entity’s affiliate;
(17) adopt and amend governing documents for managing the affairs of the entity subject to applicable law;
(18) make donations for the public welfare or for charitable, scientific, or educational purposes;
(19) voluntarily wind up its business and activities and terminate its existence;
(20) transact business or take action that will aid governmental policy;
(21) make payments or donations, or do any other act, not inconsistent with law, that furthers the business and affairs of the entity; and
(22) take other action necessary or appropriate to further the purposes of the entity.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-3.02; amended and renumbered by Act 2009-513, p. 967, §10; Act 2018-125, §1; Act 2025-281, §1.)
(a) Unless otherwise provided by its governing documents or this title a domestic entity may create indebtedness for any consideration the entity considers appropriate, including:
(1) cash;
(2) property;
(3) a contract to receive property;
(4) a debt or other obligation of the entity or of another person;
(5) services performed or a contract for services to be performed; or
(6) a direct or indirect benefit realized by the entity.
(b) In the absence of fraud in the transaction, the judgment of the governing authority of a domestic entity as to the value of the consideration received by the entity for indebtedness is conclusive.
(c) For purposes of establishing the receipt of consideration under this section, a domestic entity is treated as part of the entity creating indebtedness if the domestic entity is directly or indirectly or wholly or partly owned by that entity.
(Act 2009-513, p. 967, §11.)
(a) In this section, “guaranty” means a mortgage, pledge, security agreement, or other agreement making the domestic entity or its assets secondarily liable for another person’s contract, security, or other obligation.
(b) Unless otherwise provided by its governing documents or this title, a domestic entity may:
(1) make a guaranty on behalf of a parent, subsidiary, or affiliate of the entity; or
(2) make a guaranty of the indebtedness of another person if the guaranty may reasonably be expected directly or indirectly to benefit the entity.
(c) For purposes of subsection (b)(2), a decision by the governing authority of the domestic entity that a guaranty may reasonably be expected to benefit the entity is conclusive and not subject to attack by any person, except:
(1) a guaranty may not be enforced by a person who participated in a fraud on the domestic entity resulting in the making of the guaranty or by a person who had notice of that fraud at the time the person acquired rights under the guaranty;
(2) a proposed guaranty may be enjoined at the request of an owner of the domestic entity on the ground that the guaranty cannot reasonably be expected to benefit the domestic entity; or
(3) the domestic entity, whether acting directly or through a receiver, trustee, or other legal representative, or through an owner on behalf of the domestic entity, may bring suit for damages against the managerial officials, owners, or members who authorized the guaranty on the ground that the guaranty could not reasonably be expected to benefit the domestic entity.
(Act 2009-513, p. 967, §11.)
A domestic entity is not required to state in its governing documents any of the powers provided to the entity by this division.
(Act 2009-513, p. 967, §11.)
This division does not authorize a domestic entity or a managerial official of a domestic entity to exercise a power in a manner inconsistent with a limitation on the purposes or powers of the entity contained in its governing documents, this title, or other law of this state.
(Act 2009-513, p. 967, §11.)
(a) Except as otherwise provided by the governing documents of the domestic entity, this title, or other law, on the issuance by a domestic entity of a bond, debenture, or other evidence of indebtedness in certificated form, the seal of the entity, if the entity has adopted a seal, may be a facsimile that may be engraved or printed on the certificate.
(b) Except as otherwise provided by the governing documents of the domestic entity, this title, or other law, if a security described by subsection (a) is authenticated with the manual signature of an authorized officer of the domestic entity or an authorized officer or representative, to the extent permitted by law, of a transfer agent or trustee appointed or named by an indenture of trust or other agreement under which the security is issued, the signature of any officer of the domestic entity may be a facsimile signature.
(c) A security described by subsection (a) that contains the manual or facsimile signature of a person who is no longer an officer when the security is delivered by the entity may be adopted, issued, and delivered by the entity in the same manner and to the same extent as if the person had remained an officer of the entity.
(Act 2009-513, p. 967, §11.)
Except as otherwise provided in the governing documents or in the specific chapter that applies to that entity, an owner may lend money to and transact any lawful business with the entity and, subject to other applicable law, have the same rights and obligations with respect thereto as a person who is not an owner.
(Act 2009-513, p. 967, §11; Act 2026-495, §1.)
(a) To form a filing entity, a certificate of formation complying with Sections 10A-1-3.03, 10A-1-3.04, and 10A-1-3.05 must be filed in accordance with Article 4.
(b) The filing of a certificate of formation described by subsection (a) may be included in a filing under Article 8.
(c) The existence of a filing entity commences when the filing of the certificate of formation takes effect as provided by Article 4.
(d) Except in a proceeding by the state to terminate the existence of a filing entity, the filing of a certificate of formation by the filing officer is conclusive evidence of:
(1) the formation and existence of the filing entity;
(2) the satisfaction of all conditions precedent to the formation of the filing entity; and
(3) the authority of the filing entity to transact business in this state.
(Act 2009-513, p. 967, §13.)
The requirements for the formation of and the determination of the existence of a nonfiling entity are governed by the chapter of this title which applies to that entity.
(Act 2009-513, p. 967, §13.)
A domestic filing entity exists perpetually unless otherwise provided in the governing documents of the entity. A domestic entity may be terminated in accordance with this title.
(Act 2009-513, p. 967, §13.)
Unless provided otherwise in a chapter of this title governing a filing entity, one or more organizers of a filing entity must sign the certificate of formation of the filing entity.
(Act 2009-513, p. 967, §13; Act 2018-125, §1.)
Unless provided otherwise in a chapter of this title governing a filing entity:
(a) The certificate of formation must state:
(1) the name of the filing entity being formed;
(2) the type of filing entity being formed;
(3) for filing entities other than limited partnerships, the purpose or purposes for which the filing entity is formed, which may be stated to be or include any lawful purpose for that type of entity;
(4) the period of duration, if the entity is not formed to exist perpetually;
(5) the street address and, if different, the mailing address of the initial registered office of the filing entity and the name of the initial registered agent of the filing entity at the office;
(6) the name and address of each:
(A) organizer for the filing entity, unless the entity is formed pursuant to a statement of conversion or merger; or
(B) general partner, if the filing entity is a limited partnership;
(7) if the filing entity is formed pursuant to a conversion or merger, a statement to that effect and, if formed pursuant to a conversion, the name, mailing address of the principal office, date of formation, prior form of entity, and jurisdiction of formation of the converting entity; and
(8) any other information required by this title including, without limitation, any information required by the specific chapter of this title governing the filing entity or by Article 8 to be included in the certificate of formation for the filing entity.
(b) The certificate of formation may contain other provisions not inconsistent with law relating to the organization, ownership, governance, business, or affairs of the filing entity.
(c) Except as provided by Section 10A-1-3.04, Article 4 governs the signing and filing of a certificate of formation for a domestic entity.
(Act 2009-513, p. 967, §13; Act 2018-125, §1; Act 2019-94, §2.)
Unless provided otherwise in a chapter of this title governing an entity, the formation and existence of a domestic entity that is a converted entity in a conversion or that is to be created pursuant to a plan of merger takes effect and commences on the effectiveness of the conversion or merger, as appropriate.
(Act 2009-513, p. 967, §13; Act 2018-125, §1; Act 2019-94, §2.)
Unless provided otherwise in a chapter of this title governing an entity:
(a) The Secretary of State, upon request and payment of the requisite fee, shall furnish to any person a certificate of existence for a filing entity if the filing instruments filed with the Secretary of State show that the filing entity has been formed under the laws of this state. A certificate of existence shall reflect only the information on file with the Secretary of State. A certificate of existence must state:
(1) the filing entity’s name;
(2) that the filing entity was formed under the laws of this state and the date of formation;
(3) whether the filing entity has delivered to the Secretary of State for filing a certificate of dissolution;
(4) whether the filing entity has delivered to the Secretary of State for filing a certificate of reinstatement;
(5) the unique identifying number or other designation of the filing entity as assigned by the Secretary of State; and
(6) other facts of record in the office of the Secretary of State that are specified by the person requesting the certificate.
(b) The Secretary of State, upon request and payment of the requisite fee, shall furnish to any person a certificate of registration for a foreign entity if the filing instruments of that foreign entity filed with the Secretary of State show that the Secretary of State has filed an application for registration for authority to transact business in this state and the registration has not been revoked, withdrawn, or terminated. A certificate of registration must state:
(1) the foreign entity’s name and any alternate name adopted for use in this state;
(2) that the foreign entity is authorized to transact business in this state;
(3) that the Secretary of State has not revoked the foreign entity’s registration;
(4) that the foreign entity has not filed with the Secretary of State a certificate of withdrawal or otherwise terminated its registration;
(5) the unique identifying number or other designation of the foreign entity as assigned by the Secretary of State; and
(6) other facts of record in the office of the Secretary of State that are specified by the person requesting the certificate.
(c) Subject to any qualification stated in the certificate, a certificate of existence or certificate of registration issued by the Secretary of State is conclusive evidence that the filing entity is in existence or the foreign filing entity is authorized to transact business in this state.
(d) The Secretary of State shall not be required to issue a certificate of existence for a filing entity if the records of the Secretary of State do not show that the filing entity has been formed under the laws of this state. The Secretary of State shall furnish a certificate of existence upon the filing entity delivering to the Secretary of State a certificate of information which must list and attach certified copies of all filing instruments as to the entity which (i) were previously filed with a filing officer other than the Secretary of State, (ii) are not in the records of the Secretary of State, and (iii) prove that the filing entity was formed under the laws of this state.
(Act 2020-73, §2.)
(a) Filing instruments that (i) were required or permitted to be delivered for filing to a filing officer other than the Secretary of State prior to January 1, 2021, (ii) were delivered for filing to a filing officer other than the Secretary of State prior to January 1, 2021, (iii) were accepted by that filing officer and filed by that filing officer prior to January 1, 2021, and (iv) would, if they were delivered for filing on or after January 1, 2021, be required or permitted to be delivered to the Secretary of State for filing shall:
(1) remain in full force and effect until amended, restated, revoked, or otherwise altered by a filing instrument filed with the Secretary of State for that purpose; and
(2) not be affected as to their validity on or after January 1, 2021, solely by reason of the change of location of filings for similar filing instruments on or after January 1, 2021, to the office of the Secretary of State.
(b) A filing entity that has one or more filing instruments that are described in clauses (i) through (iv) of subsection (a) and that are not in the records of the Secretary of State, may, but is not required to, deliver to the Secretary of State for filing on or after January 1, 2021, a certificate of information. The certificate of information shall include the following information:
(1) the name of the entity;
(2) the type of entity;
(3) the date of formation of the entity;
(4) the unique identifying number or other designation assigned by the Secretary of State, if any;
(5) a list of all of the filing instruments known to the entity that are described in clauses (i) through (iv) of subsection (a) that are not in the records of the Secretary of State, which list must include the title of each filing instrument, the date of the filing of each filing instrument, and the filing officer with whom each filing instrument was delivered for filing;
(6) an attached certified copy of the certificate of formation then in effect if not in the records of the Secretary of State; and
(7) an attached certified copy of any other filing instruments of that entity then in effect that are not in the records of the Secretary of State that the entity determines to have in the records of the Secretary of State.
(Act 2020-73, §2; Act 2025-281, §1.)
(a) A filing entity may amend its certificate of formation.
(b) An amended certificate of formation may contain only provisions that:
(1) would be permitted at the time of the amendment if the amended certificate of formation were a newly filed original certificate of formation; or
(2) effect a change, exchange, reclassification, or cancellation in the membership or ownership interests or the rights of owners or members of the filing entity.
(Acts 1984, No. 84-290, p. 502, §36; §10-3A-80; amended and renumbered by Act 2009-513, p. 967, §15.)
(a) The procedure to adopt an amendment to the certificate of formation is as provided by the chapter of this title which applies to the entity, provided that unless the governing documents of the entity or the chapter of this title which applies to the entity provide otherwise, the governing authorities of the entity shall have the power, without owner or member action, to adopt one or more amendments to the entity’s certificate of formation:
(1) to delete the name and address of organizers or persons listed in the original certificate of formation as initial governing persons, other than the name and address of each general partner of a limited partnership;
(2) to delete the name and address of the initial registered agent or registered office, if a statement of change is on file with the Secretary of State;
(3) to change the entity name by adding, deleting, or changing a geographical attribution in the name, or by substituting:
a. in the case of a corporation, the word “corporation” or “incorporated” or an abbreviation of one of the words for a similar word or abbreviation;
b. in the case of a professional corporation, the words “professional corporation” for the abbreviation thereof, or the abbreviation for the words;
c. in the case of a professional association in existence on December 31, 1983, the words “professional association” for the abbreviation thereof, or the abbreviation for the words;
d. in the case of a limited partnership, the word “limited” or “limited partnership” or an abbreviation of one of the words for a similar word or abbreviation;
e. in the case of a limited liability company, the words “limited liability company” for the abbreviation thereof, or the abbreviation for the words; or
(4) to make any other change to the certificate of formation expressly permitted by this title to be made without owner or member action.
(b) A filing entity that amends its certificate of formation shall sign and file, in the manner required by Article 4, a certificate of amendment complying with Section 10A-1-3.13 or a restated certificate of formation complying with Section 10A-1-3.17.
(Act 2009-513, p. 967, §16.)
A certificate of amendment for a filing entity must state:
(1) the name of the filing entity;
(2) the type of the filing entity;
(3) the date of filing of the certificate of formation, and of all prior amendments and the filing office or offices where filed;
(4) for each provision of the certificate of formation that is added, altered, or deleted, an identification by reference or description of the added, altered, or deleted provision and, if the provision is added or altered, a statement of the text of the amended or added provision;
(5) that the amendment or amendments have been approved in the manner required by this title and the governing documents of the entity; and
(6) all other information required by the provisions of this title applicable to the filing entity to be in the certificate of amendment.
(Act 2009-513, p. 967, §16.)
(a) An amendment to a certificate of formation takes effect when the filing of the certificate of amendment takes effect as provided by Article 4.
(b) An amendment to a certificate of formation does not affect:
(1) an existing cause of action in favor of or against the entity for which the certificate of amendment is sought;
(2) a pending suit to which the entity is a party; or
(3) an existing right of a person other than an existing owner.
(c) If the name of an entity is changed by amendment, an action brought by or against the entity in the former name of the entity does not abate because of the name change.
(Act 2009-513, p. 967, §16.)
(a) A filing entity may restate its certificate of formation.
(b) An amendment effected by a restated certificate of formation must comply with Section 10A-1-3.11(b).
(Act 2009-513, p. 967, §16.)
(a) The procedure to adopt a restated certificate of formation is governed by the chapter of this title which applies to the entity.
(b) A filing entity that restates its certificate of formation shall sign and file, in the manner required by Article 4, a restated certificate of formation and accompanying statements complying with Section 10A-1-3.17.
(Act 2009-513, p. 967, §16.)
(a) A restated certificate of formation must accurately state the text of the previous certificate of formation, regardless of whether the certificate of formation is an original, corrected, or restated certificate, and include:
(1) each previous amendment to the certificate being restated that is carried forward; and
(2) each new amendment to the certificate being restated.
(b) A restated certificate of formation may omit:
(1) the name and address of each organizer other than the name and address of each general partner of a limited partnership; and
(2) any other information that may be omitted under the provisions of this title applicable to the filing entity.
(c) A restated certificate of formation that does not make new amendments requiring owner approval to the certificate of formation being restated must be accompanied by:
(1) a statement that (i) the restated certificate of formation accurately states the text of the certificate of formation being restated, as amended, restated, and corrected, except for information omitted under subsection (b), (ii) the restated certificate does not make new amendments requiring owner approval, and (iii) the governing persons have adopted the restatement in the manner required by this title and the governing documents of the entity; and
(2) any other information required by other provisions of this title applicable to the filing entity.
(d) A restated certificate of formation that makes new amendments requiring owner approval to the certificate of formation being restated must:
(1) be accompanied by a statement that each new amendment has been made in accordance with this title;
(2) identify by reference or description each added, altered, or deleted provision;
(3) be accompanied by a statement that each amendment has been approved in the manner required by this title and the governing documents of the entity, including any information required by this article to be set forth in an amendment to the certificate of formation as to the owner approval of the amendment;
(4) be accompanied by a statement that the restated certificate of formation:
(A) accurately states the text of the certificate of formation being restated and each amendment to the certificate of formation being restated that is in effect, as further amended by the restated certificate of formation; and
(B) does not contain any other change in the certificate of formation being restated except for information omitted under subsection (b); and
(5) include any other information required by the chapter of this title applicable to the entity.
(Act 2009-513, p. 967, §16; Act 2018-125, §1.)
(a) A restated certificate of formation takes effect when the filing of the restated certificate of formation takes effect as provided by Article 4.
(b) On the date the restated certificate of formation takes effect, the original certificate of formation and each prior amendment or restatement of the certificate of formation is superseded and the restated certificate of formation is the effective certificate of formation.
(c) Section 10A-1-3.14(b) and (c) apply to an amendment effected by a restated certificate of formation.
(Act 2009-513, p. 967, §16.)
(a) In discharging a duty or exercising a power, a governing person, including a governing person who is a member of a committee, in good faith and with ordinary care, may rely on information, opinions, reports, or statements, including financial statements and other financial data, concerning a domestic entity or another person and prepared or presented by:
(1) an officer or employee of the entity;
(2) legal counsel;
(3) a public accountant or certified public accountant;
(4) an investment banker;
(5) a person who the governing person reasonably believes possesses professional expertise in the matter; or
(6) a committee of the governing authority of which the governing person is not a member.
(b) A governing person may not in good faith rely on the information described by subsection (a) if the governing person has knowledge of a matter that makes the reliance unwarranted.
(c) A governing person held liable on a claim is entitled to contribution from each of the other governing persons held liable on the same claim, as appropriate to achieve equity.
(Act 2009-513, p. 967, §18.)
(a) Officers of a domestic entity may be elected or appointed in accordance with the governing documents of the entity or by the governing authority of the entity unless prohibited by the governing documents.
(b) An officer of an entity shall perform the duties in the management of the entity and has the authority as provided by the governing documents of the entity or by the governing authority that elects or appoints the officer.
(c) A person may simultaneously hold any two or more offices of an entity unless prohibited by this title or the governing documents of the entity.
(Act 2009-513, p. 967, §18.)
(a) Unless otherwise provided by the governing documents of a domestic entity, an officer may be removed for or without cause by the governing authority or as provided by the governing documents of the entity. The removal of an officer does not prejudice any contract rights of the person removed.
(b) Election or appointment of an officer does not by itself create contract rights.
(Act 2009-513, p. 967, §18.)
(a) In discharging a duty or exercising a power, an officer of a domestic entity, in good faith and ordinary care, may rely on information, opinions, reports, or statements, including financial statements and other financial data, concerning the entity or another person and prepared or presented by:
(1) another officer or an employee of the entity;
(2) legal counsel;
(3) a public accountant or certified public accountant;
(4) an investment banker; or
(5) a person who the officer reasonably believes possesses professional expertise in the matter.
(b) An officer may not in good faith rely on the information described by subsection (a) if the officer has knowledge of a matter that makes the reliance unwarranted.
(Act 2009-513, p. 967, §18.)
Each domestic entity covered shall keep the records as required by its governing documents or the chapter of this title applicable to the entity.
(Act 2009-513, p. 967, §20.)
(a) This section applies to domestic entities other than (i) corporations formed pursuant to or governed by Chapter 2A or Chapter 4, and real estate investment trusts formed pursuant to or governed by Chapter 10, each of which is governed by the separate recordkeeping requirements and record inspections provisions of Chapter 2A and (ii) nonprofit corporations formed pursuant to or governed by Chapter 3A, limited liability companies formed pursuant to or governed by Chapter 5A, general partnerships formed pursuant to or governed by Chapter 8A, limited partnerships formed pursuant to or governed by Chapter 9A, and a statewide trade association formed pursuant to or governed by Chapter 18, each of which is governed by the separate recordkeeping requirements and record inspection provisions set forth in each entity’s respective chapter governing that entity.
(b) With respect to a domestic entity covered by this section, the books and records maintained under the chapter of this title applicable to that entity and any other books and records of that entity, wherever situated, are subject to inspection and copying at the reasonable request, and at the expense of, any owner or member or the owner’s or member’s agent or attorney during regular business hours at a reasonable location specified by the entity if the owner or member meets the requirements of subsection (c) and gives the entity a signed written notice of the owner’s or member’s demand at least 10 business days before the date on which the owner or member wishes to inspect and copy. If an owner or member shall designate an agent or attorney to inspect and copy the records, the demand shall be accompanied by a power of attorney or other writing which authorizes the agent or attorney to so act on behalf of that person.
(c)(1) An owner or member of a domestic entity covered by this section may inspect and copy the records described in subsection (b) only if:
(i) the owner or member has delivered to the entity a signed written notice of the owner’s or member’s demand at least 10 business days before the date on which the owner or member wishes to inspect and copy;
(ii) the owner’s or member’s demand is made in good faith and for a proper purpose;
(iii) the owner’s or member’s demand describes with reasonable particularity the owner’s or member’s purpose and the records the owner or member desires to inspect; and
(iv) the records are directly related to the owner’s or member’s purpose.
(2) For purposes of this subsection (c), a proper purpose shall mean a purpose directly related to the owner’s or member’s interest as an owner or member; provided, however, that a demand shall not be for a proper purpose if the entity reasonably determines that the demand is in connection with:
(i) an active or pending derivative proceeding in the right of the entity that is or is expected to be instituted or maintained by the owner or member or the owner’s or member’s affiliate; or
(ii) an active or pending civil lawsuit to which the entity, or its affiliate, and the owner or member, or the owner’s or member’s affiliate, are, or are expected to be, adversarial named parties.
(d) The entity may redact portions of the records to be inspected and copied under subsection (b) to the extent the portions so redacted are not directly related to the owner’s or member’s purpose. The entity may also impose reasonable restrictions and conditions on access to and use of the records to be inspected and copied under subsection (b), including designating information confidential and imposing nondisclosure and safeguarding, and may further keep confidential from its owners or members and other persons, for a period of time as the entity deems reasonable, any information that the entity reasonably believes to be in the nature of a trade secret or other information, the disclosure of which the entity in good faith believes is not in the best interest of the entity or could damage the entity or its business or affairs, or that the entity is required by law or by agreement with a third party to keep confidential. In any dispute concerning the reasonableness of a restriction under this subsection, the entity has the burden of proving reasonableness.
(e) The rights of an owner or member to inspect and copy the records described in subsection (b) may be denied by the entity if the entity determines that the demanding owner or member has within two years preceding his, her, or its demand improperly used any information secured through any prior examination of the records of the entity.
(f) Except as set forth in this section, the governing documents of a domestic entity may not unreasonably restrict an owner’s or member’s right to information or access to books and records.
(g) If an entity does not within a reasonable time allow an owner or member who complies with the requirements of this section to inspect and copy the records demanded by the owner or member, then the demanding owner or member may apply to the designated court, and if none, the circuit court for the county in which the entity’s principal office is located in this state, and if none in this state, the circuit court for the county in which the entity’s most recent registered office is located, for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this subsection on an expedited basis. If the court orders inspection and copying of the records demanded under this section, the court may impose reasonable restrictions on their confidentiality, use, or distribution by the demanding owner or member, and the court shall also order the entity to pay the owner’s or member’s expenses incurred to obtain the order unless the entity establishes that the entity refused inspection in good faith because the entity had:
(1) a reasonable basis for doubt about the right of the owner or member to inspect the records demanded; or
(2) required reasonable restrictions on the confidentiality, use, or distribution of the records demanded to which the demanding owner or member had been unwilling to agree. If the entity has declined to deliver or make available the records because the owner or member had been unwilling to agree to restrictions proposed by the entity on the confidentiality, use, or distribution of the records, the entity shall have the burden of demonstrating that the restrictions proposed by the entity were reasonable.
(h) The rights and obligations of an owner or member of an entity provided in this section shall apply to (1) the personal representative or other legal representative of the estate of a deceased owner or member, (2) the legal representative of an owner or member under legal disability, and (3) a former owner or member, but only for books and records pertaining to the period during which the former owner or member was an owner or member of the entity.
(Act 2009-513, p. 967, §20; Act 2018-125, §1; Act 2019-94, §2; Act 2020-73, §3; Act 2023-503, §2; Act 2024-413, §1; Act 2026-495, §1.)
(a) An entity described in subsection (e) shall provide governing persons and their agents and attorneys access to its books and records, including the books and records required to be maintained under the chapter of this title applicable to the entity and other books and records of the entity for any purpose reasonably related to the governing person’s service as a governing person. The right of access shall include the right to inspect and copy books and records during ordinary business hours. An entity may impose a reasonable charge covering the costs of labor and material for copies of documents furnished.
(b) An entity described in subsection (e) shall furnish to a governing person both of the following:
(1) Without demand, any information concerning the entity’s business and affairs reasonably required for the proper exercise of the governing person’s rights and duties under the entity’s governing documents or this title.
(2) On demand, any other information concerning the entity’s business and affairs, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances.
(c) A court may require an entity described in subsection (e) to open the books and records of the entity, including the books and records required to be maintained by the entity under the chapter of this title applicable to the entity, to permit a governing person to inspect, make copies of, or take extracts from the books and records or may require an entity to furnish the governing person with information concerning the entity’s business and affairs on a showing by the governing person of all of the following:
(1) The person is a governing person of the entity.
(2) The person’s purpose for inspecting the entity’s books and records under subsection (a) or in obtaining information as to the entity’s business and affairs under subdivision (b)(1) is reasonably related to the person’s service as a governing person or, in the case of information as to the entity’s business and affairs demanded under subdivision (b)(2), that neither the demand nor the information demanded is unreasonable or otherwise improper under the circumstances.
(3) In the case of information as to the entity’s business and affairs described in subdivision (b)(2), the person has made demand for the information.
(4) The entity refused the person’s access to the books and records or to furnish information as to the entity’s business and affairs.
(d) A court may award a governing person of an entity described in subsection (e) attorney fees and any other proper relief in a suit under subsection (c) to require an entity to open its books and records.
(e) This section shall apply to domestic entities covered by Section 10A-1-3.32 and domestic entities formed pursuant to or governed by Chapter 10.
(Act 2009-513, p. 967, §20; Act 2018-125, §1; Act 2019-304, §1; Act 2020-73, §3.)
(a) Ownership interests in a domestic entity may be certificated or uncertificated.
(b) The ownership interests in a business corporation, real estate investment trust, or professional corporation must be certificated unless the governing documents of the entity or a resolution adopted by the governing authority of the entity states that the ownership interests are uncertificated. If a domestic entity changes the form of its ownership interests from certificated to uncertificated, a certificated ownership interest subject to the change becomes an uncertificated ownership interest only after the certificate is surrendered to the domestic entity.
(c) Ownership interests in a domestic entity, other than a domestic entity described in subsection (b), are uncertificated unless this title or the governing documents of the domestic entity state that the interests are certificated.
(d) Unless an entity’s chapter specifically provides otherwise, no certificate of a certificated ownership interest shall be issued in bearer form.
(Act 2009-513, p. 967, §22; Act 2018-125, §1.)
(a) A certificated ownership interest in a domestic entity may contain an impression of the seal of the entity, if any. A facsimile of the entity’s seal may be printed or lithographed on the certificate.
(b) If a domestic entity is authorized to issue ownership interests of more than one class or series, each certificate representing ownership interests that is issued by the entity must conspicuously state on the front or back of the certificate:
(1) the designations, preferences, limitations, and relative rights of the ownership interests of each class or series to the extent they have been determined and the authority of the governing authority to make those determinations as to subsequent classes or series; or
(2) that the information required by subsection (1) is stated in the domestic entity’s governing documents and that the domestic entity, on written request to the entity’s principal office or registered office, will provide a free copy of that information to the record holder of the certificate.
(c) A certificate representing ownership interests must state on the front of the certificate:
(1) that the domestic entity is organized under the laws of this state;
(2) the name of the person to whom the certificate is issued;
(3) the number and class of ownership interests and the designation of the series, if any, represented by the certificate; and
(4) if the ownership interests are shares, the par value of each share represented by the certificate, or a statement that the shares are without par value.
(d) A certificate representing ownership interests that is subject to a restriction, placed by or agreed to by the domestic entity pursuant to this title on the transfer or registration of the transfer of the ownership interests must conspicuously note the existence of the restriction on the front or back of the certificate. Even if not so noted, a restriction is enforceable against a person with actual knowledge of the restriction.
(e) Abbreviations may be used in the inscribing of certificates representing ownership interests. Without limiting the use of other abbreviations, however, the following or substantially similar abbreviations may be used in the inscribing of such certificates, and shall be construed as though they were written out in full and shall be accorded the meaning ascribed herein.
Abbreviation:Meaning:TEN COMAs tenants in common.JTWROSAs joint tenants with rights of survivorship and not as tenants in common.JT TENAs joint tenants with rights of survivorship and not as tenants in common.CUSTODIAN FOR, UTMA As custodian for______(name of minor) under the Uniform Transfers to Minors Act.
(Act 2009-513, p. 967, §22; Act 2018-125, §1; Act 2019-94, §2; Act 2020-73, §3.)
(a) The managerial official or officials of a domestic entity authorized by the governing documents of the entity to sign certificated ownership interests of the entity must sign any certificate representing an ownership interest in the entity.
(b) A certificated ownership interest that contains the manual or facsimile signature of a person who is no longer a managerial official of a domestic entity when the certificate is issued may be issued by the entity in the same manner and with the same effect as if the person had remained a managerial official.
(Act 2009-513, p. 967, §22.)
A domestic entity shall deliver to the owner thereof a certificate representing a certificated ownership interest to which the owner is entitled.
(Act 2009-513, p. 967, §22.)
(a) Except as otherwise provided in subsection (c) and in accordance with Article 8 of Title 7, after issuing or transferring an uncertificated ownership interest, a domestic entity shall notify the owner of the ownership interest in writing of any information required under this division to be stated on a certificate representing the ownership interest.
(b) Except as otherwise expressly provided by law, the rights and obligations of the owner of an uncertificated ownership interest are the same as the rights and obligations of the owner of a certificated ownership interest of the same class and series.
(c) A domestic entity is not required to send a notice under subsection (a) if:
(1) the required information is included in the governing documents of the entity; and
(2) the owner of the uncertificated ownership interest is provided with a copy of the governing documents.
(Act 2009-513, p. 967, §22.)
(a) A filing instrument must:
(1) be typewritten, printed, or electronically transmitted. If a filing instrument is electronically transmitted, the filing instrument shall be in a format that can be retrieved or reproduced in typewritten or printed form.
(2) be in the English language. A name may be in a language other than English if written in English letters or Arabic or Roman numerals. A filing instrument not in English shall be accompanied by an English translation reasonably authenticated to the satisfaction of the filing officer. If a filing instrument is not in English but is accompanied by an English translation authenticated to the satisfaction of the filing officer, then the filing instrument and the English translation shall collectively be considered one filing instrument, however, for all purposes of the laws of this state, the English translation shall govern.
(3) be signed by the person or persons required by this title or the applicable chapter to execute, and to verify, if required by the applicable chapter, the filing instrument; and
(4) if delivered to the Secretary of State for filing, state the unique identifying number or other designation as assigned by the Secretary of State to the entity or entities referenced in the filing instrument if a unique identifying number or other designation has been assigned; and
(5) be delivered to the filing officer for filing. Delivery may be made in person, by mail, by courier, or if delivered to the Secretary of State, by electronic transmission, and if delivered to a filing officer other than the Secretary of State, by electronic transmission if permitted by that filing officer. If the filing instrument is filed in typewritten or printed form and not transmitted electronically, the filing officer may require up to two exact or conformed copies be delivered with the filing instrument.
(b) A filing instrument must comply with all provisions of this title.
(c) A filing instrument that provides for the name of an entity, the change of the name of an entity, the reinstatement of an entity, or otherwise affects the name of an entity, must comply with Article 5 of this chapter.
(d) A person authorized by this title to sign a filing instrument for an entity is not required to show evidence of the person’s authority as a requirement for filing.
(e) The execution of a filing instrument constitutes an affirmation by each person executing the instrument that the facts therein are true, under penalties for perjury prescribed by Section 13A-10-103 or its successor.
(f) If a person required by this title to sign a writing or deliver a writing to a filing officer for filing under this title does not do so, any other person that is aggrieved by that failure may petition the designated court, and if none, the circuit court for the county in which the entity’s principal office is located in this state, and if none in this state, the circuit court for the county in which the entity’s most recent registered office is located, to order:
(1) the person to sign the writing;
(2) the person to deliver the writing to the filing officer for filing; or
(3) the filing officer to file the writing unsigned.
(g) If a petitioner under subsection (f) is not the entity to whom the writing pertains, the petitioner shall make the entity a party to the action. A person aggrieved under subsection (f) may seek the remedies provided in subsection (f) in a separate action against the person required to sign or deliver the writing, or as a part of any other action concerning the entity in which the person required to sign or deliver the writing, is made a party.
(h) A writing filed unsigned pursuant to subsection (f) is effective without being signed.
(i) A court may award reasonable expenses, including reasonable attorneys’ fees, to the party or parties who prevail, in whole or in part, with respect to any claim made under subsection (f).
(Act 2009-513, p. 967, §24; Act 2018-125, §1; Act 2019-94, §2; Act 2020-73, §3.)
(a) A filing instrument required or allowed by this title to be delivered to the Secretary of State for filing shall be delivered to the Secretary of State for filing.
(b) A filing instrument required or permitted by this title to be delivered to the judge of probate for filing shall be delivered to the judge of probate for filing.
(c) If a provision of this title does not specify which filing officer a filing instrument is to be delivered to for filing, that filing instrument shall be delivered to the Secretary of State for filing.
(d) If the filing officer finds that a filing instrument delivered to the filing officer for filing substantially conforms to the provisions of this title that apply to that filing instrument and that all required fees have been paid, the filing officer shall file it immediately upon delivery by:
(1) recording that filing instrument as filed, together with the name and official title of the filing officer and the date and time of receipt on the instrument and all copies required hereunder and on the receipt for the filing fee;
(2) accepting that filing instrument into the filing system adopted by the filing officer and assigning the instrument a date and time of filing; and
(3) delivering a copy of that filing instrument, indicating the date and time of the filing on the copy along with the filing fee receipt to the entity or its representative.
(e) The filing fee to be collected by the filing officer shall be paid or provision for payment shall be made in a manner permitted by the filing officer. The filing officer may accept payment of the correct amount due by check, credit card, charge card, or similar method. If the amount due is tendered by any method other than cash, the liability shall not be finally discharged until the filing officer receives final irrevocable full payment of immediately available funds. If after five consecutive calendar days prior notice by the filing officer to the entity or person who delivered a filing instrument for filing for which the filing fee was not received in final irrevocable full payment of immediately available funds, then the filing officer may declare the filing instrument to be null and void and of no legal effect as if it had never been filed and may remove the filing instrument from the records of the filing officer.
(f) If the filing officer refuses to file a filing instrument, the filing officer shall return it to the entity or its representative within five consecutive calendar days after the filing instrument was delivered to the filing officer for filing, together with a brief, written explanation of the reason for the refusal.
(g) Delivery by a filing officer of an acknowledgement of filing, receipt for the filing fee, an explanation for the reason a filing instrument was not filed, notice that a filing fee was not made in final irrevocable full payment of immediately available funds, or other communication as to a filing instrument delivered for filing to that filing officer may be accomplished by mail, courier, or electronic transmission.
(h) The duty of the filing officer to file filing instruments pursuant to this title is ministerial. Filing or refusing to file a filing instrument by the filing officer does not:
(1) affect the validity or invalidity of the filing instrument in whole or in part;
(2) relate to the correctness or incorrectness of information contained in the filing instrument; or
(3) create a presumption that the filing instrument is valid or invalid or that information contained in the filing instrument is correct or incorrect.
(i) The Secretary of State shall assign a unique identifying number to each domestic entity and each foreign filing entity for which the Secretary of State has filed or files a filing instrument and shall keep:
(1) an alphabetical list of those domestic entities and foreign filing entities;
(2) with respect to those domestic entities and foreign filing entities, all filing instruments and any other document required or permitted to be delivered to the Secretary of State for filing pursuant to this title; and
(3) the data contained in those filing instruments.
(j) The Secretary of State shall establish and maintain an automated electronic system that enables:
(i) the delivery, acceptance, and filing by electronic transmission of all filing instruments authorized or required by this title to be delivered to the Secretary of State for filing;
(ii) all filing instruments to be in a form that complies with this title but does not require the filing instruments to be in a form adopted by or otherwise required by the Secretary of State;
(iii) the delivery, acceptance, and filing of filing instruments by electronic transmission to occur 24 hours a day, seven days a week, each day of the year, including holidays and weekends; and
(iv) each person delivering a filing instrument by means of electronic transmission to the Secretary of State for filing to receive from the Secretary of State immediate confirmation that the filing instrument has been delivered to, and accepted and filed by, the Secretary of State with that confirmation to include the information required in subsections (d)(1), (d)(2), and (d)(3), associated with that filing instrument, clearly set forth on a digital copy of that filing instrument.
(k) If a filing instrument which is authorized or required to be delivered to the Secretary of State for filing by this title is delivered to the Secretary of State by means other than electronic transmission, and that filing instrument complies with the requirements of this title, then the Secretary of State shall:
(i) file that filing instrument as of the date and time of the receipt of that filing instrument;
(ii) confirm that the filing instrument has been delivered to, and accepted and filed by, the Secretary of State with that confirmation to include the information required in subsections (d)(1), (d)(2), and (d)(3), associated with that filing instrument, clearly set forth on a copy of that filing instrument; and
(iii) either (A) place that confirmation and that copy of the filing instrument in the United States mail, postage prepaid, and properly addressed to the person who delivered that filing instrument to the Secretary of State, not later than the next business day or (B) transmit that confirmation and that copy of the filing instrument by electronic transmission to the person who delivered that filing instrument to the Secretary of State, not later than the next business day.
(l) Subject to subsection (e), a filing officer who has filed a filing instrument shall maintain that filing instrument in perpetuity.
(Acts 1994, No. 94-245, p. 343, §1; Act 2000-705, p. 1442, §3; §10-2B-1.25; amended and renumbered by Act 2009-513, p. 967, §25; Act 2014-293, p. 1052, §1; Act 2018-125, §1; Act 2019-94, §2; Act 2020-73, §3; Act 2021-299, §1.)
Unless this title prescribes a specific period for filing, an entity shall promptly file each filing instrument that this title requires the entity to file.
(Act 2009-513, p. 967, §26.)
(a) A court, public office, or official body shall accept a certificate issued as provided by this title by the filing officer or a copy of a filing instrument accepted by the filing officer for filing as provided by this title that is certified by the filing officer as prima facie evidence of the facts stated in the certificate or instrument.
(b) A court, public office, or official body may record a certificate or certified copy described by subsection (a).
(c) A court, public office, or official body shall accept a certificate issued under an official seal by the filing officer as to the existence or nonexistence of facts that relate to an entity that would not appear from a certified copy of a filing instrument as prima facie evidence of the existence or nonexistence of the facts stated in the certificate.
(Act 2009-513, p. 967, §26; Act 2019-94, §2.)
(a) The Secretary of State may adopt forms for a filing instrument or a report authorized or required by this title to be filed with the Secretary of State.
(b) A person is not required to use a form adopted by the Secretary of State.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-1.21; amended and renumbered by Act 2009-513, p. 967, §27; Act 2020-73, §3.)
Each filing officer shall have the powers reasonably necessary to perform the duties required of him or her by this title.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-1.30; amended and renumbered by Act 2009-513, p. 967, §27; Act 2019-94, §2.)
(a) Any communication from a filing officer to an entity may be accomplished by electronic transmission or by mail or courier to that entity’s principal office address.
(b) If any law prohibits the disclosure by a filing officer of information contained in a filing instrument delivered for filing, the filing officer shall file the filing instrument if it otherwise complies with the applicable law, but the filing officer may redact such information so that it is not available to the public.
(Act 2020-73, §4.)
A filing instrument submitted to the filing officer takes effect on the date and time of the actual receipt by the filing officer, except as permitted by Section 10A-1-4.12 or as provided by the provisions of this title which apply to the entity making the filing or other law.
(Act 2009-513, p. 967, §29; Act 2019-94, §2; Act 2020-73, §5.)
(a) Except as otherwise provided by Section 10A-1-4.14, a filing instrument may take effect at a specified date and time after the time the instrument would otherwise take effect as provided by this title for the entity filing the instrument.
(b) If a filing instrument is to take effect on a specific date and time other than that provided by this title:
(1) the date may not be later than the 90th day after the date the instrument is delivered to the filing officer for filing;
(2) the specific time at which the instrument is to take effect may not be specified as “12:00 a.m.” or “12:00 p.m.”; and
(3) if a delayed effective date is specified, but no time is specified, at 12:01 a.m. on the date specified, which may not be more than 90 days after the date the instrument is delivered to the filing officer for filing.
(c) If a filing instrument does not specify the time zone or the place at which a date or time, or both, is to be determined, the date or time, or both, at which it becomes effective shall be those prevailing at the place of filing in this state.
(Act 2009-513, p. 967, §29; Act 2018-125, §1; Act 2020-73, §5.)
(a) The parties to a filing instrument may abandon the filing instrument if the instrument has not taken effect.
(b) To abandon a filing instrument the parties to the instrument must file with the filing officer a certificate of abandonment.
(c) A certificate of abandonment must:
(1) be signed on behalf of each entity that is a party to the action or transaction by the person authorized by this title to act on behalf of the entity;
(2) state the nature of the filing instrument to be abandoned, the date of the instrument, and the parties to the instrument; and
(3) state that the filing instrument has been abandoned in accordance with the agreement of the parties.
(d) On the filing of the certificate of abandonment, the action or transaction evidenced by the original filing instrument is abandoned and may not take effect.
(e) If in the interim before a certificate of abandonment is filed, the name of an entity that is a party to the action or transaction becomes indistinguishable on the records of the Secretary of State from the name of another entity already on file or reserved or registered pursuant to this title, the filing officer may not file the certificate of abandonment unless the entity by or for whom the certificate is filed changes its name in the manner provided by this title for that entity.
(Act 2009-513, p. 967, §29; Act 2019-94, §2.)
The effect of the following filing instruments may not be delayed:
(1) a reservation of name as provided by Division B of Article 5;
(2) a registration of name as provided by Division C of Article 5;
(3) a certificate of abandonment as provided by Section 10A-1-4.13;
(4) a certificate of correction as provided by Division C of this Article 4; or
(5) a certificate of nullification as provided by Division C of this Article 4.
(Act 2009-513, p. 967, §29; Act 2026-495, §1.)
An acknowledgment of filing issued or other action taken by the filing officer affirming the filing of a filing instrument that has a specific delayed effective date must state the date and time at which the instrument takes effect.
(Act 2009-513, p. 967, §29; Act 2019-94, §2.)
(a) Whenever any filing instrument authorized to be delivered to a filing officer for filing under any provision of this title has been filed by the filing officer, and contains an inaccurate or erroneous statement, or was defectively or erroneously signed, sealed, acknowledged, or verified, the filing instrument may be corrected or nullified by delivering a certificate of correction or a certificate of nullification of the instrument, as the case may be, to the appropriate filing officer for filing. If the filing instrument is to be corrected, the certificate of correction shall specify the inaccuracy or defect to be corrected and shall set forth the portion of the filing instrument in corrected form. If the filing instrument is to be nullified, the certificate of nullification shall specify the inaccuracy or defect with respect to the filing instrument and shall provide for the nullification of the filing instrument.
(b) A certificate of correction and a certificate of nullification must be signed by the person authorized by this title to act on behalf of the entity.
(Act 2009-513, p. 967, §31; Act 2019-94, §2; Act 2020-73, §5; Act 2026-495, §1.)
A filing instrument may be corrected to contain only those statements that this title authorizes or requires to be included in the original instrument. A certificate of correction may not alter, add, or delete a statement that by its alteration, addition, or deletion would have caused the Secretary of State to determine the filing instrument did not conform to this title at the time of filing.
(Act 2009-513, p. 967, §31.)
(a) The certificate of correction must:
(1) state the name of the entity and the unique identifying number or other designation as assigned by the Secretary of State, if any;
(2) identify the filing instrument to be corrected by (i) description; and (ii) date of filing by the filing officer;
(3) identify the inaccuracy, error, or defect to be corrected; and
(4) state in corrected form the portion of the filing instrument to be corrected.
(b) The certificate of nullification must:
(1) state the name of the entity and the unique identifying number or other designation as assigned by the Secretary of State, if any;
(2) identify the filing instrument to be nullified by (i) description; and (ii) date of filing by the filing officer;
(3) identify the inaccuracy, error, or defect; and
(4) state that the filing instrument is to be nullified.
(Act 2009-513, p. 967, §31; Act 2019-94, §2; Act 2026-495, §1.)
The certificate of correction and the certificate of nullification shall be delivered to the filing officer for filing as provided in Section 10A-1-4.02.
(Act 2009-513, p. 967, §31; Act 2019-94, §2; Act 2026-495, §1.)
(a) After the filing officer files the certificate of correction or the certificate of nullification, the filing instrument is considered to have been corrected or nullified, as the case may be, on the date the filing instrument was originally filed, except as otherwise provided by subsection (b).
(b) A filing instrument corrected or nullified in accordance with this Division C shall be effective as of the effective date of the original filing instrument as determined under Division B of this Article 4, except as to those persons relying on the original filing instrument and who are adversely affected by the correction or nullification after the effective date of the original filing instrument, the filing instrument as corrected or nullified shall be effective on the date the certificate of correction or the certificate of nullification, as the case may be, is filed.
(Act 2009-513, p. 967, §31; Act 2018-125, §1; Act 2019-94, §2; Act 2026-495, §1.)
A filing instrument that an entity files with the filing officer may be amended or supplemented in accordance with the provisions of the chapter that apply to that entity or in accordance with that entity’s governing documents. If neither the chapter that applies to that entity nor the governing documents of that entity provides or prohibits a process for the approval and filing of an amendment or supplement to that filing instrument for that entity, then that filing instrument may be amended or supplemented and filed utilizing the same process for approval and filing as was used to approve and file that filing instrument.
(Act 2009-513, p. 967, §31; Act 2016-379, p. 934, §2; Act 2019-94, §2.)
(a)(1) The Secretary of State shall collect the following fees when a filing instrument described in this title is delivered to the Secretary of State for filing:
a. Certificate of formation for all entities: Two hundred dollars ($200).
b. Amendment to a certificate of formation and a restated certificate of formation: One hundred dollars ($100).
c. Name reservations and notice of transfer of name reservation: Twenty-five dollars ($25).
d. Certificates, articles, or statements of dissolution or cancellation: One hundred dollars ($100).
e. Foreign entity registration including a statement of foreign limited liability partnership: One hundred fifty dollars ($150).
f. Certificate of existence: Twenty-five dollars ($25).
g. Certificates, articles, or statements of merger, conversion, and share exchange: One hundred dollars ($100).
h. Any other filing instrument required or permitted to be delivered to the Secretary of State for filing pursuant to this title: One hundred dollars ($100).
(2) If a state of emergency declared in this or any other state or by the federal government renders substantial compliance with this article impossible or unreasonable, the Secretary of State may waive the certificate of existence fee of twenty-five dollars ($25).
(b) The judge of probate shall collect the following fees when a filing instrument described in this title is delivered to the judge of probate for filing:
(1) Certified copy of statements of authority, denial, and cancellation thereof, permitted to be filed with the judge of probate: One hundred dollars ($100).
(2) Certified copy of certificates, articles, or statements of merger and conversion filed pursuant to this chapter, Chapter 2A, Chapter 5A, Chapter 8A, Chapter 9A, or Chapter 10: Five dollars ($5).
(3) Any other filing instrument required or permitted to be delivered to the judge of probate for filing pursuant to this title: One hundred dollars ($100).
(c) There is hereby established in the State Treasury a fund to be known and designated as the Secretary of State Entity Fund. All funds, fees, charges, costs, and collections accruing to or collected by the Secretary of State under this section or any other fees collected by the Secretary of State relating to entities shall be deposited into the State Treasury to the credit of the Secretary of State Entity Fund except as so provided in subsection (e).
(d) Except as set forth in subdivision (e)(1), all funds now or hereafter deposited in the State Treasury to the credit of the Secretary of State Entity Fund shall not be expended for any purpose unless the same shall have been allotted and budgeted in accordance with Article 4 of Chapter 4 of Title 41, and only in the amounts and for the purposes provided by the Legislature in the general appropriation bill or this section.
(e)(1) From the two hundred dollar ($200) fee collected by the Secretary of State for the filing of a certificate of formation in final irrevocable full payment of immediately available funds, the Secretary of State shall pay the sum of one hundred dollars ($100) to the county treasurer for the county in which the office of the initial registered agent for that entity is located, which sum shall constitute the entire fee due to that county for the formation of that entity.
(2) After the payment of the amounts set forth in subdivision (e)(1) have been paid, 70 percent of the remaining funds collected by the Secretary of State in final irrevocable full payment of immediately available funds in relation to entities during the fiscal year shall be deposited to the credit of the State General Fund.
(f) The fees imposed for the office of the judge of probate or required to be paid by the Secretary of State to the county treasurer pursuant to subdivision (e)(1) shall be charged and paid into the appropriate county treasury or to the judge of probate as may be authorized or required by law.
(g) The Secretary of State shall collect the following fees for copying and certifying the copy of any filing instrument relating to a domestic or foreign entity:
(1) Two dollars ($2) a page for copying.
(2) Ten dollars ($10) for the certificate.
(h) The judge of probate shall collect the following fees for copying and certifying the copy of any filing instrument relating to an entity:
(1) Two dollars ($2) a page for copying.
(2) Ten dollars ($10) for the certificate.
(Acts 1994, No. 94-245, p. 343, §1; Act 2000-724, p. 1550, §1; §10-2B-1.22; amended and renumbered by Act 2009-513, p. 967, §33; Act 2018-125, §1; Act 2019-94, §2; Act 2020-73, §5; Act 2021-222, §1.)
The filing of a certificate of formation by a filing entity pursuant to this title, an application for registration or statement of foreign limited liability partnership by a foreign filing entity pursuant to this title, or an application for reservation or registration of a name pursuant to this article does not authorize the use of a name in this state in violation of a right of another under:
(1) The Trademark Act of 1946, as amended, 15 U.S.C. Section 1051 et seq.; or
(2) Chapter 12 of Title 8; or
(3) Common law.
(Act 2009-513, p. 967, §35; Act 2018-125, §1; Act 2019-94, §2.)
A domestic entity, and a foreign filing entity with registration under Article 7, may not have a name that contains any word phrase that indicates or implies that the entity is engaged in a business that the entity is not authorized by law to pursue.
(Act 2009-513, p. 967, §35; Act 2018-125, §1.)
(a) A domestic entity may not have a name and a foreign filing entity may not register to transact business in this state under a name that is the same as or not distinguishable on the records of the Secretary of State from:
(1) the name of another existing filing entity or a general partnership that has an effective statement of partnership, statement of not for profit partnership, or limited liability partnership under Chapter 8A;
(2) the name of a foreign filing entity that has a registration under Article 7;
(3) a name that is reserved under Division B.
(b) Subsection (a) does not apply if the other entity or the person for whom the name is reserved consents in writing to the use of a name not distinguishable on the records of the Secretary of State, and submits an undertaking in form satisfactory to the Secretary of State to change its name to a name that is distinguishable on the records of the Secretary of State from the name for which application was made.
(c) In determining whether a name is the same as or not distinguishable on the records of the Secretary of State from the name of another entity, words, phrases, or abbreviations indicating the type of entity, such as “corporation,” “corp.,” “general partnership,” “GP,” “G.P.,” “not for profit general partnership,” “NGP,” “N.G.P.,” “incorporated,” “Inc.,” “limited liability company,” “LLC,” “L.L.C.,” “limited partnership,” “LP,” “L.P.,” “Ltd.,” “limited liability limited partnership,” “LLLP,” “L.L.L.P.,” “limited liability partnership,” “LLP,” or “L.L.P.” shall not be taken into account unless waived in writing by the incumbent holder of the name.
(Act 2009-513, p. 967, §35; Act 2013-338, p. 1196, §1; Act 2018-125, §1.)
(a) The name of a corporation or foreign corporation must contain:
(1) the word “corporation” or “incorporated”; or
(2) an abbreviation of one of those words.
(b) Subsection (a) does not apply to a nonprofit corporation or foreign nonprofit corporation, or to banks, trust companies, savings and loan associations, or insurance companies.
(c) In lieu of a word or abbreviation required by subsection (a), the name of a professional corporation must comply with the requirements of Section 10A-1-5.08.
(d) The requirements of subsection (a) do not apply to any corporation organized before January 1, 1981.
(e) For a corporation that elects to be a benefit corporation under the Alabama Business Corporation Law, the name of that benefit corporation must contain the words “benefit corporation,” the abbreviation “B.C.,” or the designation “BC” and may not use the word “incorporated” or an abbreviation thereof.
(Act 2009-513, p. 967, §35; Act 2013-338, p. 1196, §1; Act 2018-125, §1; Act 2020-73, §5.)
(a) The name of a limited partnership or a foreign limited partnership registered to transact business in this state may contain the name of any partner.
(b) The name of a limited partnership that is not a limited liability limited partnership must contain the phrase “limited partnership” or “Limited,” or the abbreviation “L.P.,” “LP,” or “Ltd.” and must not contain the phrase “limited liability limited partnership” or the abbreviation “LLLP” or “L.L.L.P.”
(c) The name of a limited liability limited partnership must contain the phrase “limited liability limited partnership” or the abbreviation “LLLP” or “L.L.L.P.” and must not contain the abbreviation “L.P.,” “LP,” or “Ltd.”
(d) Subject to Section 10A-1-7.07, this section applies to any foreign limited partnership transacting business in this state, having a certificate of authority to transact business in this state, or applying for a certificate of authority.
(e) The name of a limited partnership may not contain the following words: “bank,” “banking,” “banker,” “trust,” “insurance,” “insurer,” “corporation,” “incorporated,” or any abbreviation of such words.
(Act 2016-379, p. 934, §3; Act 2018-125, §1.)
The name of a limited liability company or a foreign limited liability company registered to transact business in this state must contain the words “Limited Liability Company” or the abbreviation “L.L.C.” or “LLC”.
(Acts 1993, No. 93-724, p. 1425, §5; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-5; amended and renumbered by Act 2009-513, p. 967, §36; Act 2018-125, §1.)
The name of a limited liability partnership or a foreign limited liability partnership registered to transact business in this state shall contain the words “Limited Liability Partnership” or the abbreviation “L.L.P.” or “LLP”.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1002; amended and renumbered by Act 2009-513, p. 967, §36; Act 2018-125, §1.)
(a) The name of a domestic professional corporation or of a foreign professional corporation registered to transact business in this state must contain the words “professional corporation” or the abbreviation “P.C.” or “PC” and shall otherwise conform to any rule promulgated by a licensing authority having jurisdiction of a professional service described in the certificate of formation of the professional corporation.
(b) The name of a professional entity must be consistent with a statute or regulation that governs a person that provides a professional service through the professional entity, including a rule of professional ethics.
(Acts 1983, No. 83-514, p. 763, §8; Acts 1988, 1st Ex. Sess., No. 88-905, p. 474, §1; §10-4-387; amended and renumbered by Act 2009-513, p. 967, §36; Act 2018-125, §1; Act 2019-94, §2; Act 2025-281, §1.)
(a) The name of a general partnership that has filed a statement of partnership in accordance with Section 10A-8A-2.02 must include the words “general partnership” or the abbreviation “G.P.” or “GP.”
(b) The name of a general partnership that has filed a statement of not for profit partnership in accordance with Section 10A-8A-2.02 must include the words “not for profit general partnership” or the abbreviation “N.G.P.” or “NGP.”
(Act 2009-513, p. 967, §37; Act 2025-281, §1.)
(a)(i) All filing entities and (ii) all general partnerships that are filing a statement of partnership, a statement of not for profit general partnership, or a statement of limited liability partnership, must reserve a name with the Secretary of State in accordance with this Article 5.
(b) When a filing entity delivers its certificate of formation or certificate of incorporation, as applicable, to the Secretary of State for filing, that filing entity must attach its name reservation certificate to its certificate of formation or the certificate of incorporation, as applicable; provided, that the name reservation certificate shall not be part of the certificate of formation or certificate of incorporation, as applicable.
(c) When a general partnership delivers its statement of partnership, statement of not for profit general partnership, or statement of limited liability partnership, as applicable, to the Secretary of State for filing, that general partnership must attach its name reservation certificate to its statement of partnership, statement of not for profit general partnership, or statement of limited liability partnership, as applicable; provided, that the name reservation certificate shall not be part of the statement of partnership, the statement of not for profit general partnership, or the statement of limited liability partnership, as applicable.
(Act 2018-125, §2; Act 2025-281, §1.)
(a) To reserve the exclusive use of an entity name, including a fictitious name for a foreign entity whose name is not available, a person must deliver an application to the Secretary of State for filing. Any person may file an application with the Secretary of State to reserve the exclusive use of a name under this article.
(b) The application must set forth the name and address of the applicant and the name proposed to be reserved and must be:
(1) accompanied by any required filing fee; and
(2) signed by the applicant or by the agent or attorney of the applicant.
(c) The name may also be reserved, renewed, withdrawn, and transferred by electronic means as set forth in Section 10A-1-5.17.
(Act 2009-513, p. 967, §39; Act 2013-338, p. 1196, §1; Act 2018-125, §3; Act 2020-73, §5.)
(a) The Secretary of State may not reserve a name that is the same as, or not distinguishable on the records of the Secretary of State from:
(1) the name of an existing filing entity; the name of a general partnership that has an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State under Chapter 8A;
(2) the name of a foreign filing entity that has a registration under Article 7; or
(3) a name that is reserved under this division.
(b) Subsection (a) does not apply if the other entity or the person for whom the name is reserved consents in writing to the subsequent reservation of a name not distinguishable on the records of the Secretary of State, and submits an undertaking in form satisfactory to the Secretary of State to change its name to a name that is distinguishable on the records of the Secretary of State from the name applied for or, if the conflict is with a reserved or registered name, transfers its reservation to the applicant pursuant to Section 10A-1-5.16.
(Act 2009-513, p. 967, §39; Act 2013-338, p. 1196, §1; Act 2018-125, §3.)
If the Secretary of State determines that the name specified in the application is eligible for reservation, the Secretary of State shall reserve that name for the exclusive use of the applicant.
(Act 2009-513, p. 967, §39.)
The Secretary of State shall reserve the name for the applicant until the earlier of:
(1) one year from the date the application is accepted for filing; or
(2) the date the applicant files with the Secretary of State a written notice of withdrawal of the reservation.
(Act 2009-513, p. 967, §39; Act 2013-338, p. 1196, §1.)
A person may renew the person’s reservation of a name under this division for successive one-year periods if, during the 90-day period preceding the expiration of that reservation, the person:
(1) files an application to renew the name reservation; and
(2) pays the required filing fee.
(Act 2009-513, p. 967, §39; Act 2013-338, p. 1196, §1.)
(a) A person may transfer the person’s reservation of a name by filing with the Secretary of State a notice of transfer.
(b) The notice of transfer must:
(1) be signed by the person for whom the name is reserved; and
(2) state the name and address of the person to whom the reservation is to be transferred.
(Act 2009-513, p. 967, §39.)
The Secretary of State shall establish and maintain an automated electronic name reservation system that enables (i) the reservation of a name, (ii) the renewal of that reserved name, (iii) the withdrawal of that reserved name, (iv) the transfer of that reserved name, and (v) the payment of the fees associated therewith, in order to provide for an immediate reservation, renewal, withdrawal, or transfer of the reserved name 24 hours a day, seven days a week, each day of the year, including holidays and weekends.
(Act 2020-73, §6.)
If an entity is listed in the Secretary of State’s records as an entity that has been dissolved, then if that entity is reinstated in accordance with this chapter or the chapter that governs the dissolved entity, the name of that entity following revocation and reinstatement shall be that entity’s name at the time of revocation and reinstatement if that entity’s name complies with this article at the time of revocation and reinstatement. If that entity’s name does not comply with this article, the name of that entity following revocation and reinstatement shall be that entity’s name followed by the word “reinstated.”
(Act 2021-299, §2.)
[Repealed]
Repealed by Act 2013-338, §2, effective August 1, 2013, 2013.
(Act 2009-513, p. 967, §41.)
[Repealed]
Repealed by Act 2013-338, §2, effective August 1, 2013, 2013.
(Act 2009-513, p. 967, §41.)
[Repealed]
Repealed by Act 2013-338, §2, effective August 1, 2013, 2013.
(Act 2009-513, p. 967, §41.)
[Repealed]
Repealed by Act 2013-338, §2, effective August 1, 2013, 2013.
(Act 2009-513, p. 967, §41.)
[Repealed]
Repealed by Act 2013-338, §2, effective August 1, 2013, 2013.
(Act 2009-513, p. 967, §41.)
(a) Each filing entity and each foreign filing entity with a registration under Article 7, and each general partnership that has an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State in accordance with Chapter 8A, shall designate and continuously maintain in this state:
(1) a registered agent; and
(2) a registered office.
(b) A registered agent:
(1) is an agent of the entity on which may be served any process, notice, or demand required or permitted by law to be served on the entity;
(2) may be:
(A) an individual who is a resident of this state; or
(B) a domestic entity or a foreign entity that is registered to transact business in this state;
(3) must maintain a business office at the same address as the entity’s registered office; and
(4) may not perform its duties or functions solely through the use of a virtual office, the retention by the agent of a mail forwarding service, or both. For purposes of this subsection (b)(4), “virtual office” means the performance of duties or functions solely through the internet or solely through other means of remote communication.
(c) The registered office:
(1) must be located at a street address in this state where process may be personally served on the entity’s registered agent;
(2) is not required to be a place of business of the filing entity or foreign filing entity; and
(3) may not be solely a mailbox service or a telephone answering service.
(Act 2009-513, p. 967, §43; Act 2018-125, §3; Act 2024-413, §1; Act 2026-495, §1.)
(a) An entity required to maintain a registered office and registered agent under Section 10A-1-5.31 may change its registered office, its registered agent, or both, by delivering to the Secretary of State for filing a statement of the change in accordance with the procedures in Article 4.
(b) The statement of change must contain:
(1) the name of the entity;
(2) the unique identifying number or other designation assigned by the Secretary of State;
(3) the name of the entity’s registered agent;
(4) the street address of the entity’s registered agent;
(5) if the change relates to the registered agent, the name of the entity’s new registered agent and the new registered agent’s written consent to the appointment, either on the statement or attached to it;
(6) if the change relates to the registered office, the street address of the entity’s new registered office;
(7) a recitation that the change specified in the statement is authorized by the entity; and
(8) a recitation that the street address of the registered office and the street address of the registered agent’s business are the same.
(c) On acceptance of the statement by the Secretary of State, the statement is:
(1) in the case of a domestic filing entity, effective to change the designation of the entity’s registered agent or registered office, or both, without the necessity of amending the entity’s certificate of formation;
(2) in the case of a general partnership with an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State under Chapter 8A, effective to change its registered agent or registered office, or both, without the necessity of amending its statement of partnership, statement of not for profit partnership, or statement of limited liability partnership under Chapter 8A;
(3) in the case of a foreign filing entity other than a foreign limited liability partnership, effective to change the designation of the entity’s registered agent or registered office, or both, and effective as an amendment of its application for registration as a foreign entity under Article 7; or
(4) in the case of a foreign limited liability partnership, effective to change the designation of its registered agent or registered office, or both, without the necessity of amending its statement of foreign limited liability partnership under Article 7.
(Act 2009-513, p. 967, §43; Act 2018-125, §3; Act 2025-281, §1.)
(a) The registered agent of any entity required by Section 10A-1-5.31 to designate and maintain a registered agent or registered office may give notice of a change of its name, or a change of its street address as the street address of the entity’s registered office, or both, by delivering a statement of change containing the information required by this section to the Secretary of State for filing in accordance with the procedures in Article 4.
(b) The statement of change must be signed by the registered agent, or a person authorized to sign the statement on behalf of the registered agent, and must include:
(1) the name of the entity represented by the registered agent;
(2) the unique identifying number of the entity assigned by the Secretary of State;
(3) the name of the entity’s registered agent and the street address at which the registered agent maintained the entity’s registered office;
(4) if the change relates to the name of the registered agent, the new name of that agent;
(5) if the change relates to the street address of the registered office, the new street address of the registered office; and
(6) a recitation that written notice of the change was given to the entity by the registered agent at least 10 days before the date the statement of change is delivered to the Secretary of State for filing.
(c) On acceptance of the statement of change by the Secretary of State, the statement of change is:
(1) in the case of a domestic filing entity, effective to make the change or changes set forth in the statement of change without the necessity of amending the entity’s certificate of formation;
(2) in the case of a general partnership with an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, effective to make the change or changes set forth in the statement of change without the necessity of amending its statement of partnership, statement of not for profit partnership, or statement of limited liability partnership under Chapter 8A;
(3) in the case of a foreign filing entity with an effective application for registration, effective to make the change or changes set forth in the statement of change, without the necessity of amending its application for registration as a foreign entity under Article 7; or
(4) in the case of a foreign limited liability partnership with an effective statement of limited liability partnership, effective to make the change or changes set forth in the statement of change, without the necessity of amending or restating its statement of foreign limited liability partnership under Article 7.
(d) A registered agent may deliver a statement of change to the Secretary of State for filing under this section that applies to more than one entity, and if the registered agent does so, the registered agent must include the unique identifying number assigned by the Secretary of State to each entity in the statement of change.
(Act 2009-513, p. 967, §43; Act 2018-125, §3; Act 2025-281, §1.)
(a) A registered agent of any entity required by Section 10A-1-5.31 to designate and maintain a registered agent or registered office may resign as the registered agent by giving written notice to that entity and delivering a statement of resignation to the Secretary of State for filing.
(b) Written notice to the entity must be given to the entity at the address of the entity most recently known by the agent prior to the delivery of the statement of resignation to the Secretary of State for filing.
(c) The statement of resignation shall be delivered to the Secretary of State for filing and must include:
(1) the name of the entity;
(2) the unique identifying number of the entity assigned by the Secretary of State;
(3) the name of the agent;
(4) that the agent resigns from serving as registered agent for the entity; and
(5) the address of the entity to which the agent delivered the written notice required by subsection (b).
(d) A statement of resignation takes effect on the earlier of:
(1) 12:01 a.m. on the 31st day after the day on which it is delivered to the Secretary of State for filing; or
(2) the designation of a new registered agent by the entity.
(e) When a statement of resignation takes effect, the person that resigned ceases to have responsibility under this title for any matter thereafter tendered to it as registered agent for the entity. The resignation does not affect any contractual rights the entity has against the registered agent or that the registered agent has against the entity.
(f) A registered agent may resign with respect to an entity regardless of whether the entity is in good standing.
(g) Upon the receipt of the statement of resignation by the Secretary of State, the Secretary of State shall:
(1) notify the entity of the registered agent’s resignation; and
(2) file the statement of resignation in accordance with Article 4, except that a fee is not required to file the statement of resignation.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-5.03; amended and renumbered by Act 2009-513, p. 967, §44; Act 2025-281, §1.)
If an entity required by Section 10A-1-5.31 to designate and maintain a registered agent fails to do so, or the registered agent cannot with reasonable diligence be served, the entity may be served with process as provided by the Alabama Rules of Civil Procedure and may be served with any other notice or demand required or permitted by law to be served on the entity in a manner similar to the procedure provided by the Alabama Rules of Civil Procedure for the service of process.
(Act 2009-513, p. 967, §45.)
This division does not prescribe the only or required means of serving an entity. Nothing contained in this division specifically or in this title generally shall limit or affect the right to serve any process, notice, or demand required or permitted by law to be served on an entity in any other manner now or hereafter permitted by law.
(Act 2009-513, p. 967, §45.)
In this division:
(1) “Delegate” means a person who is serving or who has served as a representative of an enterprise at the request of that enterprise at another enterprise. A person is a delegate to an employee benefit plan if the performance of the person’s official duties to the enterprise also imposes duties on or otherwise involves service by the person to the plan or participants in or beneficiaries of the plan.
(2) “Enterprise” means a domestic entity or an organization subject to this article, including a predecessor domestic entity or organization.
(3) “Expenses” includes court costs and attorney’s fees. The term does not include a judgment, a penalty, a settlement, a fine, or an excise or similar tax or an excise tax assessed against the person regarding an employee benefit plan.
(4) “Former governing person” means a person who was a governing person of an enterprise.
(5) “Official capacity” means:
(A) with respect to a governing person, the office of the governing person in the enterprise or the exercise of authority by or on behalf of the governing person pursuant to this title or the governing documents of the enterprise; and
(B) with respect to a person other than a governing person, the elective or appointive office, if any, in the enterprise held by the person or the relationship undertaken by the person on behalf of the enterprise.
(6) “Predecessor enterprise” means a sole proprietorship or organization that is a predecessor to an enterprise in:
(A) a merger, conversion, consolidation, or other transaction in which the liabilities of the predecessor enterprise are transferred or allocated to the enterprise by operation of law; or
(B) any other transaction in which the enterprise assumes the liabilities of the predecessor enterprise and the liabilities that are the subject matter of this chapter are not specifically excluded.
(7) “Proceeding” means:
(A) a threatened, pending, or completed action or other proceeding, whether civil, criminal, administrative, arbitrative, or investigative and whether formal or informal;
(B) an appeal of an action or proceeding described by paragraph (A); and
(C) an inquiry or investigation that could lead to an action or proceeding described by paragraph (A).
(8) “Representative” means a person serving as a partner, director, officer, venturer, proprietor, trustee, employee, or agent of an enterprise or serving a similar function for an enterprise.
(9) “Respondent” means a person named as a respondent or defendant in a proceeding.
(Act 2009-513, p. 967, §47; Act 2019-94, §2.)
This article does not apply to: general partnerships, limited liability partnerships, limited liability companies, limited partnerships, limited liability limited partnerships, nonprofit corporations, professional corporations, and business corporations.
(Act 2009-513, p. 967, §48; Act 2016-379, p. 934, §4; Act 2018-125, §3; Act 2019-94, §2; Act 2020-73, §7.)
(a) An enterprise shall indemnify a governing person or former governing person against reasonable expenses actually incurred by the person in connection with a proceeding in which the person is a respondent because the person is or was a governing person if the person is successful, on the merits or otherwise, in the defense of the proceeding, or any claim, issue, or matter in the proceeding, notwithstanding that he or she was not successful on any other claim, issue, or matter in the proceeding.
(b) A court that determines, in a suit for indemnification, that a governing person is entitled to indemnification under this section shall order indemnification and award to the person the expenses incurred in securing the indemnification.
(Act 2009-513, p. 967, §50.)
(a) On application of a governing person, former governing person, or delegate and after notice is provided as required by the court, a court may order an enterprise to indemnify the person to the extent the court determines that the person is fairly and reasonably entitled to indemnification in view of all the relevant circumstances.
(b) This section applies without regard to whether the governing person, former governing person, or delegate applying to the court satisfies the requirements of Section 10A-1-6.21 or has been found liable:
(1) to the enterprise; or
(2) because the person improperly received a personal benefit, without regard to whether the benefit resulted from an action taken in the person’s official capacity.
(c) The indemnification ordered by the court under this section is limited to reasonable expenses if the governing person, former governing person, or delegate is found liable:
(1) to the enterprise; or
(2) because the person improperly received a personal benefit, without regard to whether the benefit resulted from an action taken in the person’s official capacity.
(Act 2009-513, p. 967, §50.)
The certificate of formation of an enterprise may restrict the circumstances under which the enterprise must or may indemnify a person under this division.
(Act 2009-513, p. 967, §50; Act 2016-379, §4.)
(a) An enterprise may indemnify a governing person, former governing person, or delegate who was, is, or is threatened to be made a respondent in a proceeding to the extent permitted by Section 10A-1-6.22 if it is determined in accordance with Section 10A-1-6.23 that:
(1) the person:
(A) acted in good faith; and
(B) reasonably believed:
(i) in the case of conduct in the person’s official capacity that the person’s conduct was in the enterprise’s best interests; and
(ii) in all other cases, that the person’s conduct was not opposed to the enterprise’s best interests; and
(C) in the case of a criminal proceeding, did not have a reasonable cause to believe the person’s conduct was unlawful;
(2) with respect to expenses, the amount of expenses is reasonable; and
(3) indemnification should be paid.
(b) Action taken or omitted by a governing person or delegate with respect to an employee benefit plan in the performance of the person’s duties for a purpose reasonably believed by the person to be in the interests of the participants in and beneficiaries of the plan is for a purpose that is not opposed to the best interests of the enterprise.
(c) Action taken or omitted by a delegate to another enterprise for a purpose reasonably believed by the delegate to be in the interest of the other enterprise or its owners or members is for a purpose that is not opposed to the best interests of the enterprise.
(d) A person does not fail to meet the standard under subsection (a)(1) solely because of the termination of a proceeding by:
(1) judgment;
(2) order;
(3) settlement;
(4) conviction; or
(5) a plea of nolo contendere or its equivalent.
(Act 2009-513, p. 967, §52.)
(a) Except as otherwise provided by subsection (d) and subject to subsection (b), an enterprise may indemnify a governing person, former governing person, or delegate against a judgment, penalty, settlement, or fine, including an excise or similar tax or an excise tax assessed against the person regarding an employee benefit plan, and against reasonable expenses actually incurred by the person in connection with a proceeding.
(b) Indemnification under this chapter of a person who is found liable to the enterprise or is found liable because the person improperly received a personal benefit:
(1) is limited to reasonable expenses actually incurred by the person in connection with the proceeding; and
(2) may not be made in relation to a proceeding in which the person has been found liable for:
(A) willful or intentional misconduct in the performance of the person’s duty to the enterprise;
(B) breach of the person’s duty of loyalty owed to the enterprise; or
(C) an act or omission not committed in good faith that constitutes a breach of a duty owed by the person to the enterprise.
(c) A governing person, former governing person, or delegate is considered to have been found liable in relation to a claim, issue, or matter only if the liability is established by an order, including a judgment or decree of a court, and all appeals of the order are exhausted or foreclosed by law.
(d) Notwithstanding any other provision of this chapter, an enterprise may not indemnify or advance expenses to a person if the indemnification or advancement conflicts with a restriction in the enterprise’s governing documents.
(Act 2009-513, p. 967, §52.)
(a) Except as otherwise provided by subsections (b) and (c), the determinations required under Section 10A-1-6.21(a) must be made by:
(1) a majority vote of a quorum composed of the governing persons who at the time of the vote are disinterested and independent;
(2) if a quorum described by subsection (a)(1) cannot be obtained, a majority vote of a committee of the board of directors of the enterprise designated to act in the matter by a majority vote of the governing persons and composed of at least one governing person who at the time of the vote is disinterested and independent;
(3) special legal counsel selected by the board of directors of the enterprise, or selected by a committee of the board of directors, by vote in accordance with subdivision (1) or subdivision (2) or, if a quorum described by subdivision (1) cannot be obtained and a committee described by subdivision (2) cannot be established, by a majority vote of the governing persons of the enterprise;
(4) a majority of the membership interests that are entitled to vote on the transactions by virtue of not being owned by or under control of the governing persons constitutes a quorum for purposes of taking action under this section; or
(5) a unanimous vote of the owners or members of the enterprise.
(b) If special legal counsel determines under subsection (a)(3) that a person meets the standard under Section 10A-1-6.21(a)(1), the special legal counsel shall determine whether the amount of expenses is reasonable under Section 10A-1-6.21(a)(2) but may not determine whether indemnification should be paid under Section 10A-1-6.21(a)(3). The determination whether indemnification should be paid must be made in a manner specified by subsection (a)(1), (2), (4), or (5).
(c) A provision contained in the governing documents of the enterprise, a resolution of the owners, members, or governing authority, or an agreement that requires the indemnification of a person who meets the standard under Section 10A-1-6.21(a)(1) constitutes a determination under Section 10A-1-6.21(a)(3) that indemnification should be paid even though the provision may not have been adopted or authorized in the same manner as the determinations required under Section 10A-1-6.21(a). The determinations required under Section 10A-1-6.21(a)(1) and (2) must be made in a manner provided by subsection (a).
(Act 2009-513, p. 967, §52.)
(a) An enterprise may pay or reimburse reasonable expenses incurred by a governing person, former governing person, or delegate that was, is, or is threatened to be made a respondent in a proceeding in advance of the final disposition of the proceeding without making the determinations required under Section 10A-1-6.21(a) after the enterprise receives:
(1) written affirmation by the person of the person’s good faith belief that the person has met the standard of conduct necessary for indemnification under this article; and
(2) written undertaking by or on behalf of the person to repay the amount paid or reimbursed if the final determination is that the person has not met that standard or that indemnification is prohibited by Section 10A-1-6.22.
(b) A provision in the governing documents of the enterprise, a resolution of the owners, members, or governing authority, or an agreement that requires the payment or reimbursement permitted under this section authorizes that payment or reimbursement after the enterprise receives an affirmation and undertaking described by subsection (a).
(c) The written undertaking required by subsection (a)(2) must be an unlimited general obligation of the person but need not be secured and may be accepted by the enterprise without regard to the person’s ability to make repayment.
(d) An enterprise may not advance expenses to or reimburse expenses of a person if the advancement or reimbursement conflicts with a restriction in the enterprise’s governing documents.
(Act 2009-513, p. 967, §52.)
(a) Notwithstanding any other provision of this chapter but subject to subsection (d) and to the extent consistent with other law, an enterprise may indemnify and advance expenses to a person who is not a governing person, including an officer, employee, agent, or delegate, as provided by:
(1) the enterprise’s governing documents;
(2) general or specific action of the enterprise’s governing authority;
(3) resolution of the enterprise’s owners or members;
(4) contract; or
(5) common law.
(b) An enterprise shall indemnify and advance expenses to an officer to the same extent that indemnification or advancement of expenses is required under this chapter for a governing person.
(c) A person described by subsection (a) may seek indemnification or advancement of expenses from an enterprise to the same extent that a governing person may seek indemnification or advancement of expenses under this chapter.
(d) The certificate of formation of an enterprise may restrict the circumstances under which the enterprise must or may indemnify a person under this section.
(Act 2009-513, p. 967, §52; Act 2016-379, §4.)
Notwithstanding any other provision of this chapter, an enterprise may pay or reimburse reasonable expenses incurred by a governing person, officer, employee, agent, delegate, or other person in connection with that person’s appearance as a witness or other participation in a proceeding at a time when the person is not a respondent in the proceeding.
(Act 2009-513, p. 967, §52.)
(a) Notwithstanding any other provision of this article, an enterprise may purchase or procure or establish and maintain insurance or another arrangement to indemnify or hold harmless an existing or former governing person, delegate, officer, employee, or agent against any liability:
(1) asserted against and incurred by the person in that capacity; or
(2) arising out of the person’s status in that capacity.
(b) The insurance or other arrangement established under subsection (a) may insure or indemnify against the liability described by subsection (a) without regard to whether the enterprise otherwise would have had the power to indemnify the person against that liability under this chapter.
(c) Insurance or another arrangement that involves self-insurance or an agreement to indemnify made with the enterprise or a person that is not regularly engaged in the business of providing insurance coverage may provide for payment of a liability with respect to which the enterprise does not otherwise have the power to provide indemnification only if the insurance or arrangement is approved by the owners or members of the enterprise.
(d) For the benefit of persons to be indemnified by the enterprise, an enterprise, in addition to purchasing or procuring or establishing and maintaining insurance or another arrangement, may:
(1) create a trust fund;
(2) establish any form of self-insurance, including a contract to indemnify;
(3) secure the enterprise’s indemnity obligation by grant of a security interest or other lien on the assets of the enterprise; or
(4) establish a letter of credit, guaranty, or surety arrangement.
(e) Insurance or another arrangement established under this section may be purchased or procured or established and maintained:
(1) within the enterprise; or
(2) with any insurer or other person considered appropriate by the governing authority, regardless of whether all or part of the stock, securities, or other ownership interest in the insurer or other person is owned in whole or in part by the enterprise.
(f) A governing authority’s decision as to the terms of the insurance or other arrangement and the selection of the insurer or other person participating in an arrangement is conclusive. The insurance or arrangement is not voidable and does not subject the governing persons approving the insurance or arrangement to liability, on any ground, regardless of whether the governing persons participating in approving the insurance or other arrangement are beneficiaries of the insurance or arrangement. This subsection does not apply in case of actual fraud.
(Act 2009-513, p. 967, §54.)
(a) An enterprise shall report in writing to the owners or members of the enterprise an indemnification of or advance of expenses to a governing person.
(b) Subject to subsection (c), the report must be made with or before the notice or waiver of notice of the next meeting of the owners or members of the enterprise and before the next submission to the owners or members of a consent to action without a meeting.
(c) A report required by this section must be made not later than the first anniversary of the date of the indemnification or advance.
(Act 2009-513, p. 967, §54.)
(a)(1) For purposes of this Article 7, the terms register, registering, and registered include (i) a foreign entity other than a foreign limited liability partnership delivering to the Secretary of State for filing an application for registration and the Secretary of State filing the application for registration; and (ii) a foreign limited liability partnership delivering to the Secretary of State for filing a statement of foreign limited liability partnership and the Secretary of State filing the statement of foreign limited liability partnership.
(2) For purposes of this Article 7, the term registration includes (i) a filed application for registration; and (ii) a filed statement of foreign limited liability partnership.
(b) For purposes of this Article 7, the terms transact business and transacting business shall include conducting a business, activity, not for profit activity, and any other activity, whether or not for profit.
(c) To transact business in this state, a foreign entity must register under this chapter if the foreign entity:
(1) is a foreign entity, the formation of which, if formed in this state, would require the filing under Article 3 of a certificate of formation;
(2) is a foreign limited liability partnership; or
(3) affords limited liability under the law of its jurisdiction of formation for any owner or member.
(d) A foreign entity described by subsection(c) must maintain the foreign entity’s registration while transacting business in this state.
(e) For purposes of this Article 7, a foreign entity must reserve a name with the Secretary of State in accordance with Article 5 and when a foreign entity delivers its application for registration to the Secretary of State for filing, that foreign entity must attach its name reservation certificate to its application for registration.
(Act 2009-513, p. 967, §56; Act 2018-125, §3; Act 2019-94, §2; Act 2025-281, §1; Act 2026-495, §1.)
(a) A foreign entity not described by Section 10A-1-7.01 (c) may transact business in this state without registering under this chapter.
(b) Subsection (a) does not relieve a foreign entity from the duty to comply with applicable requirements under other law to file or register.
(c) A foreign entity is not required to register under this chapter if other law of this state or of federal law authorizes the foreign entity to transact the particular business authorized by law in this state.
(d) A foreign unincorporated nonprofit association is not required to register under this chapter.
(e) A foreign entity which is exempt from the requirements of Chapter 46 of Title 16, is not required to register under this chapter.
(Act 2009-513, p. 967, §56; Act 2014-330, p. 1221, §1; Act 2018-125, §3.)
A foreign entity that is eligible under other law of this state to register to transact business in this state, but that is not registered under that law, may register under this chapter unless that registering is prohibited by the other law. A registration under this chapter confers only the authority provided by this chapter.
(Act 2009-513, p. 967, §56; Act 2018-125, §3.)
(a)(1) A foreign entity described in Section 10A-1-7.01(c), other than a foreign limited liability partnership, registers by delivering to the Secretary of State for filing an application for registration in accordance with the procedures in Article 4.
(2) A foreign limited liability partnership registers by delivering to the Secretary of State for filing a statement of foreign limited liability partnership in accordance with the procedures in Article 4.
(b) The application for registration of a foreign entity described in Section 10A-1-7.01(c) other than a foreign limited liability partnership must state:
(1) the foreign entity’s name or, if that name is not available for use in this state or otherwise would not comply with Article 5, a name that satisfies the requirements of Section 10A-1-7.07 under which the foreign entity will transact business in this state;
(2) the foreign entity’s type;
(3) the foreign entity’s jurisdiction of formation;
(4) the date of the foreign entity’s formation;
(5) that the foreign entity exists as a valid foreign entity of the stated type under the laws of the foreign entity’s jurisdiction of formation;
(6) the date the foreign entity began or will begin to transact business in this state;
(7) the street address and mailing address, if different, of the principal office of the foreign entity; and
(8) the street address and mailing address, if different, of the initial registered office and the name of the initial registered agent for service of process which Article 5 requires to be maintained at that office.
(c) The statement of foreign limited liability partnership must state:
(1) the foreign limited liability partnership’s name or, if that name is not available for use in this state or otherwise would not comply with Article 5, a name that satisfies the requirements of Section 10A-1-7.07 under which the foreign entity will transact business in this state;
(2) the jurisdiction which governs the foreign limited liability partnership’s partnership agreement and under which it is a limited liability partnership;
(3) the date of the foreign limited liability partnership’s formation;
(4) that the foreign limited liability partnership exists as a valid foreign limited liability partnership under the laws of the jurisdiction which governs the foreign limited liability partnership’s partnership agreement and under which it is a limited liability partnership;
(5) the date the foreign limited liability partnership will begin to transact business in this state;
(6) the street address and mailing address, if different, of the principal office of the foreign limited liability partnership;
(7) the street address and mailing address, if different, of the initial registered office and the name of the initial registered agent for service of process which Article 5 requires to be maintained at that office.
(d) The application for registration of a foreign entity described in Section 10A-1-7.01(c) other than a foreign limited liability partnership shall be executed by one or more persons authorized to execute an application for registration. The statement of foreign limited liability partnership shall be executed by one or more partners authorized to execute a statement of foreign limited liability partnership.
(e) The status of the foreign entity after registration and the liability of its owners, managers, members, or managerial officials shall not be adversely affected by error or subsequent changes in the information stated in the application for registration or statement of foreign limited liability partnership, as applicable.
(f) The fact that an application for registration or a statement of foreign limited liability partnership, as applicable, is on file with the Secretary of State is notice that the foreign entity is authorized to transact business in this state and as notice of all facts required to be set forth in the application for registration or the statement of foreign limited liability partnership, as applicable.
(g) A foreign entity may register regardless of any differences between the law of the foreign entity’s jurisdiction and of this state applicable to the governing of the internal affairs or to the liability of an owner, member, or managerial official. Notwithstanding the foregoing, no foreign entity may carry on in this state any business of a character that may not lawfully be carried on by a domestic entity of the same type.
(h) A statement of foreign limited liability partnership is a filing instrument.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.03; amended and renumbered by Act 2009-513, p. 967, §57; Act 2018-125, §3; Act 2019-94, §2; Act 2025-281, §1.)
(a) The application for registration of a foreign entity and the statement of foreign limited liability partnership takes effect in accordance with Article 4 of this chapter. The registration of a foreign entity remains in effect until the registration terminates, is withdrawn, or is revoked.
(b) Except in a proceeding to revoke the registration of a foreign entity or as otherwise provided by the law of Alabama, the Secretary of State’s issuance of an acknowledgment that the foreign entity has filed an application for registration or a statement of foreign limited liability partnership, as applicable, is conclusive evidence of the authority of the foreign entity to transact business in this state under the foreign entity’s name or under another name stated in the application for registration in accordance with Section 10A-1-7.04(b)(1) or stated in the statement of foreign limited liability partnership in accordance with Section 10A-1-7.04(c)(1), as applicable.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.05; amended and renumbered by Act 2009-513, p. 967, §57; Act 2018-125, §3.)
(a) If any statement in an application for registration or a statement of foreign limited liability partnership was false when made or any arrangements or other facts described have changed, making the application for registration or statement of foreign limited liability partnership, as applicable, inaccurate in any respect, the foreign entity shall file with the Secretary of State an amendment correcting the false or inaccurate statement. A foreign entity must amend its registration to change its name if the name has changed. If the name of a foreign entity as changed is not available in this state or otherwise does not satisfy the requirements of Article 5, the foreign entity, pursuant to the requirements of Section 10A-1-7.07, must adopt a name that complies with Article 5 under which it will transact business in this state.
(b) A foreign entity may amend its application for registration or statement of foreign limited liability partnership by filing an application for amendment of registration as provided by Article 4.
(c) The application for amendment must be filed promptly on the discovery that any statement in the application for registration or statement of foreign limited liability partnership, as applicable, was false when made, but not later than 60 days after the discovery. The application for amendment must be filed promptly after any arrangements other facts described in the application have changed, making the application inaccurate in any respect, but not later than 90 days after the change.
(Act 2009-513, p. 967, §58; Act 2018-125, §3.)
If the name of a foreign entity does not satisfy the requirements of Article 5, the foreign entity, for use in this state, may:
(1) if a corporation, add to its corporate name the word “corporation” or “incorporated” or an abbreviation of one of the words;
(2) if a banking corporation, add to its corporate name the words “bank,” “banking,” or “bankers”;
(3) if a limited partnership that is not a limited liability limited partnership, add to its partnership name the word “limited” or the abbreviation “Ltd.” or the phrase “limited partnership” or the abbreviation “L.P.” or “LP” but its name must not contain the phrase “limited liability limited partnership” or the abbreviation “LLLP” or “L.L.L.P.”;
(4) if a limited partnership that is a limited liability limited partnership, add to its partnership name the phrase “limited liability limited partnership” or the abbreviation “LLLP” or “L.L.L.P.” and must not contain the abbreviation “Ltd.,” “L.P.,” or “LP.”
(5) if a limited liability company, add to its company name the phrase “limited liability company” or the abbreviation “L.L.C.” or “LLC”;
(6) if a professional corporation, add to its corporate name the phrase “professional corporation” or the abbreviation “P.C.” or “PC”;
(7) if a limited liability partnership, add to its partnership name the phrase “limited liability partnership” or the abbreviation “L.L.P.” or “LLP”;
(8) if a general partnership that is authorized by the laws of the jurisdiction that govern its partnership agreement to file the equivalent of a statement of partnership as provided under Chapter 8A, add to its name the phrase “general partnership” or the abbreviation “G.P.” or “GP”;
(9) if a general partnership that is authorized by the laws of the jurisdiction that govern its partnership agreement to file the equivalent of a statement of not for profit partnership as provided under Chapter 8A, add to its name the phrase “not for profit general partnership” or the abbreviation “N.G.P.” or “NGP”; and
(10) use a fictitious name available for use in this state that satisfies the requirements of Article 5, if it delivers to the Secretary of State for filing a copy of the resolution of its governing authority, certified by its secretary, adopting the fictitious name.
(Act 2009-513, p. 967, §58; Act 2016-379, p. 934, §4; Act 2018-125, §3.)
(a) A foreign entity registered in this state may withdraw the foreign entity’s registration at any time by filing a certificate of withdrawal as provided in Article 4.
(b) A certificate of withdrawal for a foreign entity described must state:
(1) the name of the foreign entity as set forth on its registration;
(2) the type of foreign entity and the foreign entity’s jurisdiction of formation and, in the case of a foreign limited liability partnership, the jurisdiction which laws govern the foreign limited liability partnership and its partnership agreement;
(3) the street address and mailing address, if different, of the principal office of the foreign entity;
(4) that the foreign entity no longer is transacting business in this state;
(5) that the foreign entity:
(A) revokes the authority of the foreign entity’s registered agent in this state to accept service of process; and
(B) consents that service of process in any action, suit, or proceeding stating a cause of action arising in this state during the time the foreign entity was authorized to transact business in this state may be made on the foreign entity in accordance with the Alabama Rules of Civil Procedure and any other notice or demand required or permitted by law to be served on the foreign entity may be served in a manner similar to the procedure provided for the service of process by the Alabama Rules of Civil Procedure;
(6)(A) a mailing address to which process may be mailed pursuant to the applicable service of process procedures of the Alabama Rules of Civil Procedure and to which any notice or demand required or permitted by law to be served on the foreign entity may be mailed; and
(B) a commitment by the foreign entity that if the mailing address stated in the certificate of withdrawal under paragraph (A) changes, the foreign entity will promptly amend the certificate of withdrawal to update the address; and
(7) that any money due or accrued to the state has been paid or describes the provisions that have been made for the payment of that money.
(c) A certificate from the Alabama Department of Revenue that all applicable taxes and fees have been paid must be filed with the certificate of withdrawal.
(d) If the existence or separate existence of a foreign entity registered in this state terminates, a certificate by an authorized governmental official of the entity’s jurisdiction of formation that evidences the termination shall be filed with the Secretary of State.
(e) The registration of the foreign entity terminates when a certificate of withdrawal under this section or a certificate evidencing termination under subsection (d) is filed.
(f) The certificate of withdrawal of a foreign entity described in subsection (b), other than a foreign limited liability partnership, shall be executed by one or more persons authorized to execute a certificate of withdrawal. A certificate of withdrawal of a foreign limited liability partnership shall be executed by one or more partners authorized to execute a certificate of withdrawal. The certificate of termination of a foreign entity described in subsection (d), other than a foreign limited liability partnership, shall be executed by one or more persons authorized to execute a certificate of termination. A certificate of termination of a foreign limited liability partnership shall be executed by one or more partners authorized to execute a certificate of termination.
(Act 2009-513, p. 967, §60; Act 2018-125, §3; Act 2019-94, §2; Act 2026-495, §1.)
The Secretary of State may commence a proceeding under Section 10A-1-7.13 to revoke the registration of a foreign entity authorized to transact business in this state if:
(1) the foreign entity does not pay within 180 days after they are due any applicable privilege or corporation share tax, qualification fee or admission tax, or interest or penalties imposed by this title or other law;
(2) the foreign entity is without a registered agent or registered office in this state for 60 days or more;
(3) the foreign entity does not file a statement of change of registered agent or registered office with the Secretary of State under Section 10A-1-5.32 within 60 days of the change or its registered agent does not file a change of name or change of address of the registered office with the Secretary of State under Section 10A-1-5.33 within 60 days of the change;
(4) an organizer, governing person, or agent of the foreign entity signed a document he or she knew was false in any material respect with intent that the document be delivered to the Secretary of State for filing; or
(5) the Secretary of State receives a duly authenticated certificate from the Secretary of State or other official having custody of entity records in the state or country under whose laws the foreign entity is formed or is governed stating that the foreign entity has been terminated.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.30; amended and renumbered by Act 2009-513, p. 967, §61; Act 2018-125, §3; Act 2024-213, §1.)
(a) If the Secretary of State determines that one or more grounds exist under Section 10A-1-7.12 for revocation of a registration, the Secretary of State shall serve the foreign entity with written notice of the determination of the Secretary of State by serving the foreign entity’s registered agent, which service may be by registered mail, or, if the foreign entity has no registered agent or its registered agent cannot with reasonable diligence be served, by serving the foreign entity by any method permitted under Sections 10A-1-5.35 and 10A-1-5.36.
(b) If the foreign entity does not correct each ground for revocation or demonstrate to the reasonable satisfaction of the Secretary of State that each ground determined by the Secretary of State does not exist within 60 days after service of the notice is perfected under subsection (a), the Secretary of State may revoke the foreign entity’s registration by signing a certificate of revocation that recites the ground or grounds for revocation and its effective date. The Secretary of State shall file the original of the certificate and serve a copy on the foreign entity by serving its registered agent, which service may be by registered mail, or, if the foreign entity has no registered agent or its registered agent cannot with reasonable diligence be served, by serving the foreign entity by any method permitted under Sections 10A-1-5.35 and 10A-1-5.36.
(c) The authority of a foreign entity to transact business in this state ceases on the date shown on the certificate revoking its registration.
(d) Revocation of a foreign entity’s registration does not terminate the authority of the registered agent of the foreign entity. Service of process in any action, suit, or proceeding stating a cause of action arising in this state during the time the foreign entity was authorized to transact business in this state may be made on the foreign entity whose registration has been suspended by service on the registered agent or by serving the entity by any method permitted under Sections 10A-1-5.35 and 10A-1-5.36.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.31; amended and renumbered by Act 2009-513, p. 967, §61; Act 2018-125, §3.)
(a) A foreign entity may appeal the Secretary of State’s revocation of its registration to the Circuit Court of Montgomery County within 30 days after service of the certificate of revocation is perfected under Section 10A-1-7.13. The foreign entity appeals by petitioning the court to set aside the revocation and attaching to the petition copies of the Secretary of State’s acknowledgment of its application for registration or statement of foreign limited liability partnership, as applicable, and the Secretary of State’s certificate of revocation.
(b) The court may summarily order the Secretary of State to reinstate the registration, may order a trial de novo, or may take any other action the court considers appropriate.
(c) The court’s final decision may be appealed as in other civil proceedings.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.32; amended and renumbered by Act 2009-513, p. 967, §61; Act 2018-125, §3.)
(a) A foreign entity transacting business in this state, except a corporation or other organization formed pursuant to federal law, may not maintain any action, suit, or proceeding in any court of this state until it has registered in this state.
(b) The failure of a foreign entity to register in this state does not impair the validity of any contract or act of the foreign entity or prevent the foreign entity from defending any action, suit, or proceeding in any court of this state.
(c) A foreign entity, by transacting business in this state without registration, shall be deemed to consent to service of process with respect to causes of action arising out of business transacted in this state, or to service of any notice or demand required or permitted by law, by registered mail addressed to the foreign entity at the office required to be maintained in the state or other jurisdiction where it is organized, or, if not so required, at the principal office of the entity, or by serving the entity by any method permitted under Sections 10A-1-5.35 and 10A-1-5.36.
(d) The liability of an owner or owners of a foreign entity is governed by the laws of the state or other jurisdictions where it is organized, and any limitations on that liability are not waived solely by reason of having transacted business in Alabama without registration.
(e) This division applies to a foreign entity transacting business in this state without registering with the Secretary of State.
(Acts 1993, No. 93-724, p. 1425, §52; §10-12-52; amended and renumbered by Act 2009-513, p. 967, §63; Act 2012-304, p. 666, §1; Act 2019-94, §2.)
(a) The failure of a foreign filing entity to register to transact business in this state or to appoint and maintain a registered agent in this state shall not impair the validity of any contract or act of the foreign entity and shall not prevent the foreign entity from defending any action or proceeding in any court of this state, but the foreign entity shall not maintain any action or proceeding in any court of this state until it has delivered to the Secretary of State for filing an application for registration or a statement of foreign limited liability partnership, as applicable, in accordance with Section 10A-1-7.04. A foreign filing entity, by transacting business in this state without filing an application for registration or a statement of foreign limited liability partnership, as applicable, appoints the Secretary of State as its agent for service of process with respect to causes of action arising out of the transaction of business or activities in this state. The liability of the owners, members, and managerial officials of a foreign filing entity is governed by the laws of the jurisdiction under whose laws it was formed or under which it is governed, and any limitations on that liability are not waived solely by reason of having transacted business in this state without filing an application for registration or a statement of foreign limited liability partnership, as applicable.
(b) The Attorney General may bring an action to restrain a foreign entity from transacting business in this state in violation of this title.
(Acts 1993, No. 93-724, p. 1425, §53; §10-12-53; amended and renumbered by Act 2009-513, p. 967, §63; Act 2018-125, §3.)
The Secretary of State may collect from a foreign filing entity a late filing fee equal to the application for registration fee or the statement of foreign limited liability partnership fee, as applicable, for the foreign filing entity for each year of delinquency if the foreign filing entity has transacted business in this state for more than 90 days. The Secretary of State may condition the effectiveness of a registration on the payment of the late filing fee.
(Act 2009-513, p. 967, §64; Act 2018-125, §3.)
This article does not excuse a foreign filing entity from complying with duties imposed under other law, including other chapters of this title, relating to filing or registering requirements.
(Act 2009-513, p. 967, §64; Act 2018-125, §3.)
A foreign entity may not conduct in this state a business, activity, not for profit activity, or any other activity, whether or not for profit, that is not permitted by this title to be transacted by the domestic entity to which it most closely corresponds, unless other law of this state authorizes the foreign entity to conduct the business, activity, not for profit activity, or any other activity, whether or not for profit.
(Act 2009-513, p. 967, §66; Act 2018-125, §3; Act 2019-94, §2.)
A foreign entity with a registration under this article enjoys the same but no greater rights and privileges as the domestic entity to which it most closely corresponds.
(Act 2009-513, p. 967, §66; Act 2018-125, §3.)
[Repealed]
Repealed by Act 2018-125, §7, effective January 1, 2019.
(Act 2009-513, p. 967, §66.)
A vote cast or consent provided by a foreign entity with respect to its ownership or membership interest in a domestic entity of which the foreign entity is a lawful owner or member, and the foreign entity’s participation in the management and control of the business and affairs of the domestic entity to the extent of the participation of other owners or members, are not invalidated if the foreign entity does not register to transact business in this state, subject to all law governing a domestic entity, including the antitrust law of this state.
(Act 2009-513, p. 967, §66; Act 2018-125, §3.)
(a) The public interest lying in the promotion of business and industry in this state, it is the intent of the Legislature and declared to be the policy of the State of Alabama by passage of this section to promote and encourage industry and business in Alabama and specifically to induce the location within this state of the principal administrative office, principal distribution or manufacturing plant or principal place of business of foreign entities engaged in manufacturing, industrial, commercial, business, transportation, utility, public service, and research enterprises. This section shall be liberally construed in conformity with this intention.
(b) When a foreign entity that transacts only a portion of its business in this state has located, or is in the process of locating, its principal administrative office, its principal distribution or manufacturing plant or its principal place of business in this state, the authority, jurisdiction or power conferred by any law of this state on any agency, commission, department, or instrumentality of the state to control or regulate the foreign entity, its business, property, securities, or obligations shall not be deemed to apply to, and shall not be exercised with respect to, that portion of its business transacted or its property located without the state nor to the securities or obligations of the foreign entity; provided that nothing contained in this section shall be construed to repeal, alter, or modify any of the provisions of Title 8 relating to securities.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.11; amended and renumbered by Act 2009-513, p. 967, §67.)
Foreign entities that have complied with the constitution and laws of this state as to transacting business in this state shall have the same right of eminent domain and the same remedies for enforcing the rights as domestic entities of like kind and character possess.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.12; amended and renumbered by Act 2009-513, p. 967, §67; Act 2018-125, §3.)
Any foreign entity which has complied with the constitution and laws of this state for transacting business in this state and which is engaged in constructing or operating a streetcar, electric light, telegraph, telephone or power lines, pipelines, or works in an adjoining state may extend its lines, tracks, ways, pipelines, or works into this state and connect with other lines, pipelines, ways or works of similar or like character and, for that purpose, may have and exercise the same rights, privileges, immunities and remedies as to right of eminent domain and condemnation proceedings as are had and exercised by domestic entities engaged in like or similar business.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.13; amended and renumbered by Act 2009-513, p. 967, §67; Act 2018-125, §3.)
(a) Except as otherwise provided by a statute described by this subsection, the provisions of this title governing a foreign entity apply to a foreign entity registered or granted authority to transact business in this state under:
(1) a special statute that does not contain a provision regarding a matter provided for by this title with respect to a foreign entity; or
(2) another statute that specifically provides that the general law for the granting of a registration or certificate of authority to the foreign entity to transact business in this state supplements the special statute.
(b) Except as otherwise provided by a special statute described by subsection (a), a document required to be filed with the Secretary of State under the special statute must be signed and filed in accordance with Article 4.
(Act 2009-513, p. 967, §69.)
A conversion of an entity may be accomplished as provided in this section:
(a) The plan of conversion must be in writing, and:
(1) must include the following:
(A) the name, type of entity, and mailing address of the principal office of the converting entity, and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;
(B) the name, type of entity, and mailing address of the principal office of the converted entity after conversion;
(C) the terms and conditions of the conversion, including the manner and basis for converting interests in the converting entity into any combination of money, interests in the converted entity, and other consideration allowed in subsection (b); and
(D) the organizational documents of the converted entity;
(2) may include other provisions relating to the conversion not prohibited by law; and
(3) at the time of the approval of the plan of conversion in accordance with subsection (c), the plan of conversion is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of conversion that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of conversion.
(b) In connection with a conversion, rights or securities of or interests in a converting entity may be exchanged for or converted into cash, property, or rights or securities of or interests in the converted entity, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, or rights or securities of or interests in another entity, or may be cancelled.
(c) The plan of conversion of an entity must be approved as follows:
(1) CORPORATIONS.
(A) If a corporation is governed by Chapter 2A and that corporation is a converting entity, the plan of conversion under subsection (a) must be approved in accordance with Chapter 2A. If the conversion is a corporate action as described in Section 10A-2A-13.02, then the rights, obligations, and procedures under Article 13 of Chapter 2A shall be applicable to that conversion.
(B) If a corporation is governed by Chapter 3A and that corporation is a converting entity, the plan of conversion under subsection (a) must be approved in accordance with Chapter 3A.
(C) If a corporation is not governed by Chapter 2A or Chapter 3A and that corporation is a converting entity, the plan of conversion under subsection (a) must be approved in accordance with the law of the jurisdiction of formation of that corporation.
(2) LIMITED PARTNERSHIPS, INCLUDING LIMITED LIABILITY LIMITED PARTNERSHIPS. If a limited partnership is a converting entity, the plan of conversion under subsection (a) must be approved in accordance with Chapter 9A.
(3) LIMITED LIABILITY COMPANIES. If a limited liability company is a converting entity, the plan of conversion under subsection (a) must be approved in accordance with Chapter 5A.
(4) GENERAL PARTNERSHIPS, INCLUDING LIMITED LIABILITY PARTNERSHIPS. If a general partnership is a converting entity, the plan of conversion under subsection (a) must be approved in accordance with Chapter 8A. If a general partnership is the converting entity and that general partnership does not have an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, then that general partnership must, before proceeding with a conversion deliver to the Secretary of State for filing, a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership simultaneously with the delivery to the Secretary of State for filing, of a statement of conversion.
(5) REAL ESTATE INVESTMENT TRUST. The terms and conditions of the plan of conversion under subsection (a) of a real estate investment trust must be approved by all of the trust’s shareholders or as otherwise provided in the trust’s declaration of trust; but in no case may the vote required for shareholder approval be set at less than a majority of all the votes entitled to be cast. No conversion of a real estate investment trust to a general or limited partnership may be effected without the consent in writing of each shareholder who will have personal liability with respect to the converted entity, notwithstanding any provision in the declaration of trust of the converting real estate investment trust providing for less than unanimous shareholder approval for the conversion.
(6) OTHER ENTITY. In the case of an entity not specified in subdivisions (1) through (5), a plan of conversion under subsection (a) must be approved in writing by all owners of that entity or, if the entity has no owners, then by all members of the governing authority of that entity.
(d) After the plan of conversion is approved pursuant to subsection (c):
(1) if the converting entity is a filing entity, the converting entity shall deliver to the Secretary of State for filing, a statement of conversion, which must include:
(A) the name, type of entity, and mailing address of the principal office of the converting entity, and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;
(B) a statement that the converting entity has been converted into the converted entity;
(C) the name and type of entity of the converted entity and the jurisdiction of its governing statute;
(D) the street and mailing address of the principal office of the converted entity;
(E) the date the conversion is effective under the governing statute of the converted entity;
(F) a statement that the conversion was approved as required by this chapter;
(G) a statement that the conversion was approved as required by the governing statute of the converted entity;
(H) a statement that a copy of the plan of conversion will be furnished by the converted entity, on request and without cost, to any owner of the converted or converting entity; and
(I) if the converted entity is a foreign entity not authorized to conduct activities and affairs in this state, the street and mailing address of an office for the purposes of Section 10A-1-8.04(b); and
(2) if the converted entity is (I) a filing entity, the converting entity shall deliver to the Secretary of State for filing a certificate of formation or (II) a general partnership, the converting entity shall deliver to the Secretary of State for filing a statement of partnership, a statement of not for profit partnership, or a statement of limited liability partnership, as applicable, which certificate of formation or statement of partnership, statement of not for profit partnership, or statement of limited liability partnership, as applicable, must include, in addition to the information required in the chapter governing the certificate of formation of the converted entity, the following:
(A) The name, mailing address of the principal office of, type of entity, and the jurisdiction of the governing statute of the converting entity and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;
(B) A statement that the converting entity has been converted into the converted entity;
(C) The filing office where the certificate of formation, if any, of the converting entity is filed and the date of the filing thereof;
(D) If the converted entity is one in which one or more owners lack limited liability protection, a statement that each owner of the converting entity who is to become an owner without limited liability protection of the converted entity has consented in writing to the conversion as required by this section; and
(E) A statement that the conversion was approved pursuant to this section and, if the converting entity is a foreign entity, that the conversion was approved as required by the governing statute of such foreign entity;
(3) if the converting entity is required pursuant to subdivisions (1) and (2) to deliver to the Secretary of State for filing both (I) a statement of conversion and (II)(A) a certificate of formation or (B) a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership, as applicable, then the converting entity shall deliver the statement of conversion and the certificate of formation or the statement of partnership, statement of not for profit partnership, or statement of limited liability partnership, as applicable, to the Secretary of State simultaneously; and
(4) if the converting entity is a general partnership and that partnership does not have an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, then the converting entity must deliver to the Secretary of State for filing, a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership simultaneously with the delivery to the Secretary of State for filing, of a statement of conversion.
(e) After a plan of conversion is approved and before the conversion takes effect, the plan may be amended or abandoned as provided in the plan, or if the plan does not provide for amendment or abandonment, in the same manner as required for the approval of the plan of conversion originally.
(f) A conversion becomes effective:
(1) if the converted entity is a filing entity, the effective date determined in accordance with Article 4 of this chapter; and
(2) if the converted entity is not a domestic filing entity, as provided by the governing statute of the converted entity.
(g) When a conversion becomes effective:
(1) all property and contract rights owned by the converting entity remain vested in the converted entity without transfer, reversion, or impairment, and the title to any property vested by deed or otherwise in the converting entity shall not revert or be in any way impaired by reason of the conversion;
(2) all debts, obligations, or other liabilities of the converting entity continue as debts, obligations, or other liabilities of the converted entity and neither the rights of creditors nor the liens upon the property of the converting entity shall be impaired by the conversion;
(3) an action or proceeding pending by or against the converting entity continues as if the conversion had not occurred and the name of the converted entity may, but need not, be substituted for the name of the converting entity in any pending action or proceeding;
(4) except as prohibited by law other than this chapter, all of the rights, privileges, immunities, powers, and purposes of the converting entity remain vested in the converted entity;
(5) except as otherwise provided in the statement of conversion, the terms and conditions of the statement of conversion take effect;
(6) except as otherwise agreed, for all purposes of the laws of this state, the converting entity shall not be required to wind up its affairs or pay its liabilities and distribute its assets, and the conversion shall not be deemed to constitute a dissolution of the converting entity;
(7) for all purposes of the laws of this state, the rights, privileges, powers, interests in property, debts, liabilities, and duties of the converting entity, shall be the rights, privileges, powers, interests in property, debts, liabilities, and duties of the converted entity, and shall not be deemed as a consequence of the conversion, to have been transferred to the converted entity;
(8) if the converted entity is a domestic entity, for all purposes of the laws of this state, the converted entity shall be deemed to be the same entity as the converting entity, and the conversion shall constitute a continuation of the existence of the converting entity in the form of the converted entity;
(9) if the converting entity is a domestic entity, the existence of the converted entity shall be deemed to have commenced on the date the converting entity commenced its existence in the jurisdiction in which the converting entity was first created, formed, organized, incorporated, or otherwise came into being;
(10) the conversion shall not affect the choice of law applicable to matters arising prior to conversion;
(11) if the Secretary of State has assigned a unique identifying number or other designation to the converting entity and (i) the converted entity is formed pursuant to the laws of this state, or (ii) the converted entity is, within 30 days after the effective date of the conversion, registered to transact business in this state, then that unique identifying number or other designation shall continue to be assigned to the converted entity; and
(12)(A) An owner with limited liability protection remains liable, if at all, for an obligation incurred by the converting entity before the conversion takes effect only to the extent, if any, the owner would have been liable if the conversion had not occurred.
(B) An owner with limited liability protection who becomes an owner without limited liability protection is liable for an obligation of the converted entity incurred after conversion to the extent provided for by the laws applicable to the converted entity.
(13) An owner without limited liability protection who as a result of a conversion becomes an owner of a converted entity with limited liability protection remains liable for an obligation incurred by the converting entity before the conversion takes effect only to the extent, if any, the owner would have been liable if the conversion had not occurred.
(h) If:
(1) the converting entity is a filing entity, a general partnership with an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, a foreign filing entity registered to transact business or not for profit activity in this state, or a qualified foreign limited liability partnership;
(2) the converted entity will be a filing entity, a general partnership with an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, a foreign filing entity registered to transact business or not for profit activity in this state, or a qualified foreign limited liability partnership;
(3) the name of the converting entity and the converted entity are to be the same, other than words, phrases, or abbreviations indicating the type of entity; and
(4) the name of the converted entity complies with Division A of Article 5 or Section 10A-1-7.07, as the case may be; then, notwithstanding Division B of Article 5, no name reservation shall be required and the converted entity shall for all purposes of this title be entitled to utilize the name of the converting entity without any further action by the converting entity or the converted entity.
(i) A certified copy of the statement of conversion may be delivered to the office of the judge of probate in any county in which the converting entity owned real property, to be recorded without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate shall, however, be entitled to collect a filing fee of five dollars ($5). Any filing shall evidence chain of title, but lack of filing shall not affect the converted entity’s title to the real property.
(Act 2000-211, p. 279, §2; §10-15-3; amended and renumbered by Act 2009-513, p. 967, §71; Act 2014-293, p. 1052, §1; Act 2018-125, §3; Act 2019-94, §2; Act 2020-73, §7; Act 2023-503, §2; Act 2025-281, §1.)
A merger of two or more entities, whether the other entity or entities are the same or another form of entity, may be accomplished as provided in this section.
(a) The plan of merger must be in writing, and:
(1) must include the following:
(A) the name, type of entity, and mailing address of the principal office of each entity that is a party to the merger, the jurisdiction of the governing statute of each entity that is a party to the merger, and the respective unique identifying number or other designation as assigned by the Secretary of State, if any, of each entity that is a party to the merger;
(B) the name, type of entity, and mailing address of the principal office of the surviving entity and, if the surviving entity is to be created pursuant to the merger, the surviving entity’s organizational documents;
(C) the terms and conditions of the merger, including the manner and basis for converting the interests in each entity that is a party to the merger into any combination of money, interests in the surviving entity, and other consideration as allowed by subsection (b); and
(D) if the surviving entity is not to be created pursuant to the merger, any amendments to be made by the merger to the surviving entity’s organizational documents;
(2) with respect to all entities other than nonprofit entities, a plan of merger may provide:
(A) that (i) any party to the plan of merger that fails to perform its obligations under the plan of merger in accordance with the terms and conditions of the plan of merger, or that otherwise fails to comply with the terms and conditions of the plan of merger, in each case, required to be performed or complied with prior to the time the merger becomes effective, or that otherwise fails to consummate, or fails to cause the consummation of, the merger (whether prior to a specified date, upon satisfaction or, to the extent permitted by law, waiver of all conditions to consummation set forth in the plan of merger, or otherwise) shall be subject, in addition to any other remedies available at law or in equity, to the penalties or consequences as are set forth in the plan of merger (which penalties or consequences may include an obligation to pay to the other party or parties to the plan of merger an amount representing, or based on the loss of, any premium or other economic entitlement the owners of the other party would be entitled to receive pursuant to the terms of the plan of merger if the merger were consummated in accordance with the terms of the plan of merger) and (ii) if, pursuant to the terms of the plan of merger, an entity is entitled to receive payment from another party to the plan of merger of any amount representing a penalty or consequence (as specified in clause (i) of this Section 10A-1-8.02(a)(2)(A)), the entity shall be entitled to enforce the other party’s payment obligation and, upon receipt of any payment, shall be entitled to retain the amount of the payment so received;
(B)(i) for the appointment, at or after the time at which the plan of merger is adopted by the owners of a domestic entity that is a party to the merger in accordance with the requirements of the statute governing that party, of one or more persons (which may include the surviving or resulting domestic entity or any officer, manager, representative or agent thereof) as representative of the owners of that domestic entity that is a party to the merger, including those whose ownership interests shall be cancelled, converted, or exchanged in the merger, and for the delegation to that person or persons of the sole and exclusive authority to take action on behalf of the owners pursuant to the plan of merger, including taking such actions as the representative determines to enforce (including by entering into settlements with respect to) the rights of the owners under the plan of merger, on the terms and subject to the conditions set forth in the plan of merger, and (ii) that any appointment pursuant to clause (i) of this Section 10A-1-8.02(a)(2)(B) shall be irrevocable and binding on all owners from and after the adoption of the plan of merger by the requisite vote of the owners pursuant to the statute governing that entity; and
(C) that any provision adopted pursuant to Section 10A-1-8.02(a)(2)(B) may not be amended after the merger has become effective or may be amended only with the consent or approval of persons specified in the plan of merger;
(3) a plan of merger may include other provisions relating to the merger not prohibited by law; and
(4) at the time of the approval of the plan of merger in accordance with subsection (c), the plan of merger is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of merger that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of merger.
(b) In connection with a merger, rights or securities of or interests in a merged entity may be exchanged for or converted into cash, property, or rights or securities of or interests in the surviving entity, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, or rights or securities of or interests in another entity, or may be cancelled.
(c) The plan of merger of an entity must be approved as follows:
(1) CORPORATIONS.
(A) If a corporation is governed by Chapter 2A and that corporation is a party to a merger, a plan of merger under subsection (a) must be approved in accordance with Chapter 2A. If the merger is a corporate action as described in Section 10A-2A-13.02, then the rights, obligations, and procedures under Article 13 of Chapter 2A shall be applicable to that merger.
(B) If a nonprofit corporation is governed by Chapter 3A and that corporation is a party to a merger, a plan of merger under subsection (a) must be approved in accordance with Chapter 3A.
(C) If a corporation is not governed by Chapter 2A or Chapter 3A and that corporation is a party to a merger, the plan of merger under subsection (a) must be approved in accordance with the law of the jurisdiction of formation of that corporation.
(2) LIMITED PARTNERSHIPS. In the case of a limited partnership that is a party to the merger, a plan of merger under subsection (a) must be approved in accordance with Chapter 9A.
(3) LIMITED LIABILITY COMPANIES. In the case of a limited liability company that is a party to the merger, a plan of merger under subsection (a) must be approved in accordance with Chapter 5A.
(4) GENERAL PARTNERSHIPS, INCLUDING LIMITED LIABILITY PARTNERSHIPS. In the case of a general partnership that is a party to the merger, a plan of merger under subsection (a) must be approved in accordance with Chapter 8A. All general partnerships, other than a general partnership that is created pursuant to the merger, that are parties to a merger must have on file with the Secretary of State a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership prior to delivering the statement of merger to the Secretary of State for filing.
(5) REAL ESTATE INVESTMENT TRUST. In the case of a real estate investment trust that is a party to the merger, a plan of merger under subsection (a) must be approved in writing by all of the trust’s shareholders or as otherwise provided in the trust’s declaration of trust, but in no case may the vote required for shareholder approval be set at less than a majority of all the votes entitled to be cast. No merger of a real estate investment trust with a general or limited partnership that is to be the surviving entity may be effected without the consent in writing of each shareholder who will have personal liability with respect to the surviving entity, notwithstanding any provision in the declaration of trust of the converting real estate investment trust providing for less than unanimous shareholder approval for the merger.
(6) OTHER ENTITY. In the case of an entity not specified in paragraphs (1) through (5) above, a plan of merger under subsection (a) must be approved in writing by all owners of that entity or, if the entity has no owners, then by all members of the governing authority of that entity.
(d) After each entity has approved the plan of merger pursuant to subsection (c), the entities must deliver to the Secretary of State for filing a statement of merger signed on behalf of each entity as provided by its governing statute which must include:
(1) the name, type of entity, and mailing address of the principal office of each entity that is a party to the merger, the jurisdiction of the governing statute of each entity that is a party to the merger, and the respective unique identifying number or other designation as assigned by the Secretary of State, if any, of each entity that is a party to the merger;
(2) the name, type of entity, and mailing address of the principal office of the surviving entity, the unique identifying number or other designation as assigned by the Secretary of State, if any, of the surviving entity, the jurisdiction of the governing statute of the surviving entity, and, if the surviving entity is created pursuant to the merger, a statement to that effect;
(3) for each general partnership, the date of the filing of the statement of partnership, statement of not for profit partnership, or statement of limited liability partnership, if any, and all prior amendments and the filing office or offices, if any, where such is filed;
(4) the date the merger is effective under the governing statute of the surviving entity;
(5) if the surviving entity is to be created pursuant to the merger, (i) if it will be a filing entity, its certificate of formation; or (ii) if it will be a non-filing entity, any document that creates the entity that is required to be in a public writing or in the case of a general partnership, its statement of partnership, statement of not for profit partnership, or statement of limited liability partnership, as applicable;
(6) if the surviving entity is a domestic entity that exists before the merger, any amendments provided for in the plan of merger for the organizational documents that created the domestic entity that are required to be in a public writing, or in the case of a general partnership, its statement of partnership, statement of not for profit partnership, or statement of limited liability partnership, as applicable;
(7) a statement as to each entity that the merger was approved as required by the entity’s governing statute;
(8) a statement that a copy of the plan of merger will be furnished by the surviving entity, on request and without cost, to any owner of any entity which is a party to the merger;
(9) if the surviving entity is a foreign entity not authorized to conduct activities and affairs in this state, the street and mailing address of an office for the purposes of Section 10A-1-8.04; and
(10) any additional information required by the governing statute of any entity that is a party to the merger.
(e) Prior to the statement of merger being delivered for filing to the Secretary of State in accordance with subsection (d), all parties to the merger that are general partnerships, other than a general partnership that is created pursuant to the merger, must have on file with the Secretary of State a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership.
(f) After a plan of merger is approved and before the merger takes effect, the plan may be amended or abandoned as provided in the plan, or if the plan does not provide for amendment or abandonment, in the same manner as required for the approval of the plan of merger originally.
(g) If all of the entities that are parties to the merger are domestic entities, the merger becomes effective on the effective date determined in accordance with Article 4. If one or more parties to the merger is a foreign entity, or a foreign entity created by the merger is the surviving entity, the merger shall become effective at the later of:
(1) when all documents required to be filed in foreign jurisdictions to effect the merger have become effective, or
(2) the effective date determined in accordance with Article 4.
(h) When a merger becomes effective:
(1) the surviving entity continues or, in the case of a surviving entity created pursuant to the merger, comes into existence;
(2) each entity that merges into the surviving entity ceases to exist as a separate entity;
(3) except as provided in the plan of merger, all property owned by, and every contract right possessed by, each merging entity that ceases to exist vests in the surviving entity without transfer, reversion, or impairment and the title to any property and contract rights vested by deed or otherwise in the surviving entity shall not revert, be in any way impaired, or be deemed to be a transfer by reason of the merger;
(4) all debts, obligations, and other liabilities of each merging entity, other than the surviving entity, are debts, obligations, and liabilities of the surviving entity, and neither the rights of creditors, nor any liens upon the property of any entity that is a party to the merger, shall be impaired by the merger;
(5) an action or proceeding, pending by or against any merging entity that ceases to exist continues as if the merger had not occurred and the name of the surviving entity may, but need not be substituted in any pending proceeding for the name of any merging entity whose separate existence ceased in the merger;
(6) except as prohibited by law other than this chapter or as provided in the plan of merger, all the rights, privileges, franchises, immunities, powers, and purposes of each merging entity, other than the surviving entity, vest in the surviving entity;
(7) except as otherwise provided in the plan of merger, the terms and conditions of the plan of merger take effect;
(8) except as otherwise agreed, if a merged entity ceases to exist, the merger does not dissolve the merged entity;
(9) if the surviving entity is created pursuant to the merger:
(A) if it is a general partnership, the statement of partnership, statement of not for profit partnership, or statement of limited liability partnership becomes effective; or
(B) if it is an entity other than a partnership, the organizational documents that create the entity become effective;
(10) the interests in a merging entity that are to be converted in accordance with the terms of the merger into interests, obligations, rights to acquire interests, cash, other property, or any combination of the foregoing, are converted as provided in the plan of merger, and the former holders of interests are entitled only to the rights provided to them by those terms or to any appraisal or dissenters’ rights they may have under the governing statute governing the merging entity;
(11) if the surviving entity exists before the merger:
(A) except as provided in the plan of merger, all the property and contract rights of the surviving entity remain its property and contract rights without transfer, reversion, or impairment;
(B) the surviving entity remains subject to all its debts, obligations, and other liabilities; and
(C) except as provided by law other than this chapter or the plan of merger, the surviving entity continues to hold all of its rights, privileges, franchises, immunities, powers, and purposes.
(12) Service of process in an action or proceeding against a surviving foreign entity to enforce an obligation of a domestic entity that is a party to a merger may be made by registered mail addressed to the surviving entity at the address set forth in the statement of merger or by any method provided by the Alabama Rules of Civil Procedure. Any notice or demand required or permitted by law to be served on a domestic entity may be served on the surviving foreign entity by registered mail addressed to the surviving entity at the address set forth in the statement of merger or in any other manner similar to the procedure provided by the Alabama Rules of Civil Procedure for the service of process.
(13)(A) An owner of an entity with limited liability protection remains liable, if at all, for an obligation incurred prior to the merger by an entity that ceases to exist as a result of the merger only to the extent, if any, that the owner would have been liable under the laws applicable to owners of the form of entity that ceased to exist if the merger had not occurred.
(B) An owner with limited liability protection who, as a result of the merger, becomes an owner without limited liability protection of the surviving entity is liable for an obligation of the surviving entity incurred after merger to the extent provided for by the laws applicable to the surviving entity.
(14) An owner without limited liability protection of an entity that ceases to exist as a result of a merger and who as a result of the merger becomes an owner of a surviving entity with limited liability protection remains liable for an obligation of the entity that ceases to exist incurred before the merger takes effect only to the extent, if any, that the owner would have been liable if the merger had not occurred.
(i) A certified copy of the statement of merger required to be filed under this section may be filed in the real estate records in the office of the judge of probate in any county in which any merged entity owned real property, without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate, however, shall be entitled to collect a filing fee of five dollars ($5). Any such filing shall evidence chain of title, but lack of filing shall not affect the surviving entity’s title to such real property.
(j) Except as set forth in Section 10A-1-8.02(a)(4), for purposes of this Section 10A-1-8.02, a plan of merger, whether referred to as a plan of merger, an agreement of merger, a merger agreement, a plan and agreement of merger, an agreement and plan of merger, or otherwise, means a writing that includes the items required or allowed to be set forth therein and includes any agreement, instrument, or other document referenced therein or associated therewith that sets forth the terms and conditions of the merger.
(Act 2000-211, p. 279, §3; §10-15-4; amended and renumbered by Act 2009-513, p. 967, §71; Act 2014-293, p. 1052, §1; Act 2018-125, §3; Act 2019-94, §2; Act 2020-73, §7; Act 2023-503, §2; Act 2025-281, §1.)
This article is not exclusive. This article does not preclude any entity from being converted or merged under law other than this chapter.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-908; amended and renumbered by Act 2009-513, p. 967, §71; Act 2018-125, §3.)
(a) One or more foreign entities may merge with one or more domestic entities in accordance with Section 10A-1-8.02, and a foreign entity may convert to a domestic entity, or a domestic entity may convert to a foreign entity in accordance with Section 10A-1-8.01 only if:
(1) The merger or conversion is permitted by the law of the state or country under whose law each foreign entity is formed and each foreign entity complies with that law in effecting the merger or conversion.
(2) In the case of a conversion, the foreign entity complies with the requirements of Section 10A-1-8.01.
(3) In the case of a merger, the foreign entity complies with the requirements of Section 10A-1-8.02.
(b) Upon the merger or conversion taking effect, the surviving foreign entity of a merger and the foreign converted entity in a conversion is deemed:
(1) To consent that service of process in a proceeding to enforce any obligation or any appraisal or dissenter’s rights of owners of each domestic entity a party to the merger or conversion may be made by registered mail addressed to the surviving or converted entity at the address set forth in the statement of merger or statement of conversion, as the case may be, or by any method provided by the Alabama Rules of Civil Procedure. Any notice or demand required or permitted by law to be served on the domestic entity may be served on the surviving or converted foreign entity by registered mail addressed to the surviving or converted entity at the address set forth in the plan of merger or statement of conversion, as the case may be, or in any other manner similar to the procedure provided by the Alabama Rules of Civil Procedure for the service of process;
(2) To consent to the jurisdiction of the courts of this state to enforce any debt, obligation, or other liability for which a converting or merging entity is liable if, before the conversion or merger, the converting or merging entity was subject to suit in this state on the debt, obligation, or other liability. If the foreign entity fails to designate or maintain a registered agent, or the designated registered agent cannot with reasonable diligence be served, then service of process on that foreign entity for the purposes of enforcing a debt, obligation, or other liability under this subsection may be made in the same manner and has the same consequences as provided in Section 10A-1-5.35; and
(3) To agree that it will promptly pay to dissenting owners with appraisal or dissenter’s rights, of each domestic entity that is a party to the merger or conversion the amount, if any, to which they are entitled under Alabama law.
(Act 2000-211, p. 279, §5; §10-15-6; amended and renumbered by Act 2009-513, p. 967, §71; Act 2014-293, p. 1052, §1; Act 2019-94, §2.)
This article does not apply to business corporations, nonprofit corporations, limited liability companies, general partnerships, and limited partnerships.
(Act 2018-125, §5; Act 2019-94, §2; Act 2023-503, §2.)
In this article, the following terms have the following meanings:
(1) CLAIM. A right to payment, damages, or property, whether liquidated or unliquidated, accrued or contingent, matured or unmatured.
(2) WINDING UP. The process of winding up the business and affairs of a domestic entity as a result of the occurrence of an event requiring winding up.
(Act 2009-513, p. 967, §73; §10A-1-9.01 renumbered by Act 2018-125, §4.)
The dissolution of a domestic entity shall be as specified in the chapter of this title applicable to the entity.
(Act 2009-513, p. 967, §75.)
(a) As soon as reasonably practicable after a domestic entity is dissolved, the domestic entity shall:
(1) cease to carry on its business, except to the extent necessary to wind up its business;
(2) collect and sell its property to the extent the property is not to be distributed in kind to the domestic entity’s owners or members; and
(3) perform any other act required to wind up its business and affairs.
(b) During the winding up process, the domestic entity may prosecute or defend a civil, criminal, or administrative action and perform any other act appropriate to wind up its business and affairs, including sending notice of the winding up to known claimants or publishing notice of the winding up to unknown claimants.
(Act 2009-513, p. 967, §75.)
(a) A dissolved domestic entity may dispose of the known claims against it by following the procedure described in subsection (b) at any time after the effective date of the dissolution of that dissolved domestic entity.
(b) A dissolved domestic entity shall give notice of the dissolution in writing to the holder of any known claim. The notice must:
(1) Identify the dissolved domestic entity;
(2) Describe the information required to be included in a claim;
(3) Provide a mailing address to which the claim is to be sent;
(4) State the deadline, which may not be fewer than 120 days from the effective date of the notice, by which the dissolved domestic entity must receive the claim; and
(5) State that if not sooner barred, the claim will be barred if not received by the deadline.
(c) Unless sooner barred by any other statute limiting actions, a claim against a dissolved domestic entity is barred:
(1) If a claimant who was given notice under subsection (b) does not deliver the claim to the dissolved domestic entity by the deadline;
(2) If a claimant whose claim was rejected by the dissolved domestic entity does not commence a proceeding to enforce the claim within 90 days from the effective date of the rejection notice.
(d) For purposes of this section, “known claim” or “claim” includes unliquidated claims but does not include a contingent liability that has not matured so that there is no immediate right to bring suit, or a claim based on an event occurring after the effective date of dissolution.
(e) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.06; amended and renumbered by Act 2009-513, p. 967, §77; Act 2018-125, §6.)
(a) A dissolved domestic entity may publish notice of its dissolution and request that persons with claims against the dissolved domestic entity present them in accordance with the notice.
(b) The notice authorized by subsection (a) must:
(1) Be published at least one time in a newspaper of general circulation in the county in which the dissolved domestic entity’s principal office is located, or, if it has none in this state, in the county in which the dissolved domestic entity’s registered office, is or was last located;
(2) Describe the information that must be included in a claim and provide a mailing address to which the claim is to be sent; and
(3) State that if not sooner barred, a claim against the dissolved domestic entity will be barred unless a proceeding to enforce the claim is commenced within two years after the publication of the notice.
(c) If a dissolved domestic entity publishes a newspaper notice in accordance with subsection (b), unless sooner barred by any other statute limiting actions, the claim of each of the following claimants is barred unless the claimant commences a proceeding to enforce the claim against the dissolved domestic entity within two years after the publication date of the newspaper notice:
(1) A claimant who was not given notice under Section 10A-1-9.21;
(2) A claimant whose claim was timely sent to the dissolved domestic entity but not acted on by the dissolved domestic entity; and
(3) A claimant whose claim is contingent at the effective date of the dissolution of the dissolved domestic entity, or is based on an event occurring after the effective date of the dissolution of the dissolved domestic entity.
(d) A claim that is not barred under this section, any other statute limiting actions, or Section 10A-1-9.21 may be enforced:
(1) Against a dissolved domestic entity, to the extent of its undistributed assets; and
(2) If the assets of a dissolved domestic entity have been distributed after dissolution, against the person or persons owning ownership interests in the dissolved domestic entity to the extent of that person’s proportionate share of the claim or of the assets of the dissolved domestic entity distributed to that person after dissolution, whichever is less, but a person’s total liability for all claims under subsection (d) may not exceed the total amount of assets distributed to that person after dissolution of the dissolved domestic entity.
(e) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(f) If a claim has been satisfied, disposed of, or barred under Section 10A-1-9.21, this section, or other law, the person or persons designated to wind up the affairs of a dissolved domestic entity, and the owners of the ownership interests receiving assets from the dissolved domestic entity, shall not be liable for that claim.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.07; amended and renumbered by Act 2009-513, p. 967, §77; Act 2018-125, §6.)
(a) A domestic entity may revoke a voluntary decision to dissolve the entity by approval of the revocation in the manner and within the time specified in the chapter of this title governing the entity. If the chapter of this title does not specify a time within which a revocation must be made, revocation of a voluntary decision to dissolve must be made before winding up of the entity is complete.
(b) A domestic entity may continue its business following the revocation of a voluntary decision to wind up under subsection (a).
(Act 2009-513, p. 967, §79.)
In addition to the grounds for reinstating a dissolved entity pursuant to the chapter of this title applicable to the entity, if the chapter of this title applicable to the entity does not provide for reinstatement, the entity may be reinstated if the legal existence of the entity is necessary to:
(1) convey or assign property;
(2) settle or release a claim or liability;
(3) take an action; or
(4) sign an instrument or agreement.
(Act 2009-513, p. 967, §79.)
[Repealed]
Repealed by Act 2019-94, §3, effective January 1, 2021.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-1.01; amended and renumbered by Act 2009-513, p. 967, §81.)
[Repealed]
Repealed by Act 2019-94, §3, effective January 1, 2021.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-1.20; amended and renumbered by act 2009-513, p. 967, §83.)
[Repealed]
Repealed by Act 2019-94, §3, effective January 1, 2021.
(Act 2009-513, p. 967, §84.)
[Repealed]
Repealed by Act 2019-94, §3, effective January 1, 2021.
(Act 2009-513, p. 967, §84.)
[Repealed]
Repealed by Act 2019-94, §3, effective January 1, 2021.
(Acts 1994, No. 94-245, p. 343, §1; Acts 1995, No. 95-255, p. 427, §1; Act 2006-564, p. 1307, §3; §10-2B-1.40; amended and renumbered by Act 2009-513, p. 967, §87.)
[Repealed]
Repealed by Act 2019-94, §3, effective January 1, 2021.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-1.41; amended and renumbered by Act 2009-513, p. 967, §87.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
One or more persons may act as the incorporator or incorporators of a corporation by signing and delivering articles of incorporation to the judge of probate of the county in which the corporation is to have its initial registered office for filing.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-2.01; amended and renumbered by Act 2009-513, p. 967, §89.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) In addition to the information required to be set forth in a certificate of formation by Section 10A-1-3.05, articles of incorporation of a corporation formed under this chapter must set forth:
(1) The number of shares the corporation is authorized to issue;
(2) The names and addresses of the individuals who are to serve as the initial directors; and
(3) The purpose or purposes for which the corporation is organized, which may be stated to be or to include the transaction of any lawful business for which corporations may be incorporated under this chapter.
(b) The articles of incorporation may set forth:
(1) Provisions not inconsistent with law regarding:
(i) Reservation to the shareholders of the right to adopt the initial bylaws of the corporation;
(ii) Managing the business and regulating the affairs of the corporation;
(iii) Defining, limiting, and regulating the powers of the corporation, its board of directors, and shareholders; or
(iv) A par value for authorized shares or classes of shares;
(2) Any provision that under this chapter is required or permitted to be set forth in the bylaws; and
(3) A provision eliminating or limiting the liability of a director to the corporation or its shareholders for money damages for any action taken, or any failure to take any action, as a director, except liability for (A) the amount of a financial benefit received by a director to which he or she is not entitled; (B) an intentional infliction of harm on the corporation or the shareholders; (C) a violation of Section 10A-2-8.33; (D) an intentional violation of criminal law; or (E) a breach of the director’s duty of loyalty to the corporation or its shareholders.
(c) The articles of incorporation need not set forth any of the corporate powers enumerated in Sections 10A-1-2.11, 10A-1-2.12, and 10A-1-2.13.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-2.02; amended and renumbered by Act 2009-513, p. 967, §89.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Upon the effectiveness of the filing of the articles of incorporation as provided in Sections 10A-1-4.11 and 10A-1-4.12, corporate existence begins.
(b) The judge of probate’s filing of the articles of incorporation pursuant to Section 10A-1-4.02 is conclusive proof that the incorporators satisfied all conditions precedent to incorporation except in a proceeding by the state to cancel or revoke the incorporation or involuntarily dissolve the corporation.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-2.03; amended and renumbered by Act 2009-513, p. 967, §89.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Any person purporting to act as or on behalf of a corporation, knowing there was no incorporation under this chapter, is liable for all liabilities created by so acting.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-2.04; amended and renumbered by Act 2009-513, p. 967, §89.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) After incorporation the initial directors shall hold an organizational meeting, at the call of a majority of the directors, to complete the organization of the corporation by appointing officers, adopting bylaws, unless the power to adopt initial bylaws has been reserved to the shareholders in the articles of incorporation, and carrying on any other business brought before the meeting.
(b) An organization meeting may be held in or out of this state.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-2.05; amended and renumbered by Act 2009-513, p. 967, §89.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The board of directors of a corporation shall adopt initial bylaws for the corporation unless the right to adopt the initial bylaws is reserved to the shareholders in the articles of incorporation.
(b) The bylaws of a corporation may contain any provision for managing the business and regulating the affairs of the corporation that is not inconsistent with law or the articles of incorporation.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-2.06; amended and renumbered by Act 2009-513, p. 967, §89.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Unless the articles of incorporation provide otherwise, the board of directors of a corporation may adopt bylaws to be effective only in an emergency defined in subsection (d). The emergency bylaws, which are subject to amendment or repeal by the shareholders, may make all provisions necessary for managing the corporation during the emergency, including:
(1) Procedures for calling a meeting of the board of directors;
(2) Quorum requirements for the meeting; and
(3) Designation of additional or substitute directors.
(b) All provisions of the regular bylaws consistent with the emergency bylaws remain effective during the emergency. The emergency bylaws are not effective after the emergency ends.
(c) Corporate action taken in good faith in accordance with emergency bylaws:
(1) Binds the corporation; and
(2) May not be used to impose liability on a corporate director, officer, employee, or agent.
(d) An emergency exists for purposes of this section if a quorum of the corporation’s directors cannot readily be assembled because of some catastrophic event.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-2.07; amended and renumbered by Act 2009-513, p. 967, §89.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
The purchaser or purchasers at any sale, public or private, of the property or franchises of any corporation, if not a corporation authorized by the laws of this state to purchase and hold the property of the corporation, may, within 30 days after the sale and conveyance, become incorporated under this chapter and the purchaser or purchasers may associate with himself or herself or themselves the requisite number of other persons to become incorporated. Upon the organization of the corporation and the conveyance to it of the property and franchises of the corporation by the purchaser or purchasers, the corporation shall become, and be entitled to, and shall have, hold and enjoy, all property rights and franchises.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-2.08; amended and renumbered by Act 2009-513, p. 967, §89.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Corporations may be organized under this chapter for any lawful purpose.
(Act 2009-513, p. 967, §91.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Unless its articles of incorporation provide otherwise, every corporation organized under this chapter has perpetual duration and succession in its corporate name and has the same powers as an individual to do all things necessary or convenient to carry out its business and affairs, including, without limitation, all entity powers provided in Sections 10A-1-2.11, 10A-1-2.12, and 10A-1-2.13.
(Act 2009-513, p. 967, §91.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) In anticipation of or during an emergency defined in subsection (d), the board of directors of a corporation may:
(1) Modify lines of succession to accommodate the incapacity of any director, officer, employee, or agent; and
(2) Relocate the principal office, designate alternative principal offices or regional offices, or authorize the officers to do so.
(b) During an emergency defined in subsection (d), unless emergency bylaws provide otherwise:
(1) Notice of a meeting of the board of directors need be given only to those directors whom it is practicable to reach and may be given in any practical manner, including by publication and radio; and
(2) One or more officers of the corporation present at a meeting of the board of directors may be deemed to be directors for the meeting in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum.
(c) Corporate action taken in good faith during an emergency under this section to further the ordinary business affairs of the corporation:
(1) Binds the corporation; and
(2) May not be used to impose liability on a corporate director, officer, employee, or agent.
(d) An emergency exists for purposes of this section if a quorum of the corporation’s directors cannot readily be assembled because of some catastrophic event.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-3.03; amended and renumbered by Act 2009-513, p. 967, §92.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Except as provided in subsection (b), the validity of corporate action may not be challenged on the ground that the corporation lacks or lacked power to act.
(b) A corporation’s power to act may be challenged:
(1) In a proceeding by a shareholder against the corporation to enjoin the act;
(2) In a proceeding by the corporation, directly, derivatively, or through a receiver, trustee, or other legal representative, against an incumbent or former director, officer, employee, or agent of the corporation; or
(3) In a proceeding by the Attorney General under Section 10A-2-14.30.
(c) In a shareholder’s proceeding under subsection (b)(1) to enjoin an unauthorized corporate act, the court may enjoin or set aside the act, if equitable and if all affected persons are parties to the proceeding, and may award damages for loss, other than anticipated profits, suffered by the corporation or another party because of enjoining the unauthorized act.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-3.04; amended and renumbered by Act 2009-513, p. 967, §92.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The articles of incorporation must prescribe the classes of shares and the number of shares of each class that the corporation is authorized to issue. If more than one class of shares is authorized, the articles of incorporation must prescribe a distinguishing designation for each class, and, prior to the issuance of shares of a class, the preferences, limitations, and relative rights of that class must be described in the articles of incorporation. All shares of a class must have preferences, limitations, and relative rights identical with those of other shares of the same class except to the extent otherwise permitted by Section 10A-2-6.02.
(b) The articles of incorporation must authorize (1) one or more classes of shares that together have unlimited voting rights, and (2) one or more classes of shares, which may be the same class or classes as those with voting rights, that together are entitled to receive the net assets of the corporation upon dissolution.
(c) The articles of incorporation may authorize one or more classes of shares that:
(1) Have special, conditional, or limited voting rights, or no right to vote, except to the extent prohibited by this chapter or other law;
(2) Are redeemable or convertible as specified in the articles of incorporation: (i) at the option of the corporation, the shareholder, or another person or upon the occurrence of a designated event; (ii) for cash, indebtedness, securities, or other property; (iii) in a designated amount or in an amount determined in accordance with a designated formula or by reference to extrinsic data or events;
(3) Entitle the holders to distributions calculated in any manner, including dividends that may be cumulative, noncumulative, or partially cumulative;
(4) Have preference over any other class of shares with respect to distributions whether upon the dissolution of the corporation or otherwise.
(d) The description of the designations, preferences, limitations, and relative rights of share classes in subsection (c) is not exhaustive.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.01; amended and renumbered by Act 2009-513, p. 967, §98.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If the articles of incorporation so provide, and if the action is not inconsistent with the provisions of the Constitution of Alabama of 1901, as the same may be amended from time to time, the board of directors may determine, in whole or in part, the preferences, limitations, and relative rights, within the limits set forth in Section 10A-2-6.01, of: (1) any class of shares before the issuance of any shares of that class; or (2) one or more series within a class before the issuance of any shares of that series.
(b) Each series of a class must be given a distinguishing designation.
(c) All shares of a series must have preferences, limitations, and relative rights identical with those of other shares of the same series, and except to the extent otherwise provided in the description of that series, with those of other series of the same class.
(d) Before issuing any shares of a class or series created under this section, the corporation must deliver to the judge of probate for filing articles of amendment which, except as required by the Constitution of Alabama of 1901, as the same may be amended from time to time, are effective without shareholder approval and constitute an amendment to the articles of incorporation. The articles shall set forth:
(1) The name of the corporation;
(2) The text of the amendment determining the terms of the class or series of shares;
(3) The date it was adopted; and
(4) A statement that the amendment was duly adopted by the board of directors.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.02; amended and renumbered by Act 2009-513, p. 967, §98.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation may issue the number of shares of each class or series authorized by the articles of incorporation. Shares that are issued are outstanding shares until they are reacquired, redeemed, converted, or canceled.
(b) The reacquisition, redemption, or conversion of outstanding shares is subject to the limitations of subsection (c) of this section and to Section 10A-2-6.40.
(c) At all times that shares of the corporation are outstanding, one or more shares that together have unlimited voting rights and one or more shares that together are entitled to receive the net assets of the corporation upon dissolution must be outstanding.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.03; amended and renumbered by Act 2009-513, p. 967, §98.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation may:
(1) Issue fractions of a share or pay in money the value of fractions of a share;
(2) Arrange for disposition of fractional shares by the shareholders;
(3) Issue scrip in registered or bearer form entitling the holder to receive a full share upon surrendering enough scrip to equal a full share.
(b) Each certificate representing scrip must be conspicuously labeled “scrip” and must contain the information required by Section 10A-1-3.42(c).
(c) The holder of a fractional share is entitled to exercise the rights of a shareholder, including the right to vote, to receive dividends, and to participate in the assets of the corporation upon liquidation. The holder of scrip is not entitled to any of these rights unless the scrip provides for them.
(d) The board of directors may authorize the issuance of scrip subject to any condition considered desirable, including:
(1) That the scrip will become void if not exchanged for full shares before a specified date; and
(2) That the shares for which the scrip is exchangeable may be sold and the proceeds paid to the scripholders.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.04; amended and renumbered by Act 2009-513, p. 967, §98.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A subscription for shares entered into before incorporation is irrevocable for six months unless the subscription agreement provides a longer or shorter period or all the subscribers agree to revocation.
(b) The board of directors may determine the payment terms of subscriptions for shares that were entered into before incorporation, unless the subscription agreement specifies them. A call for payment by the board of directors must be uniform so far as practicable as to all shares of the same class or series, unless the subscription agreement specifies otherwise.
(c) Shares issued pursuant to subscriptions entered into before incorporation are fully paid and nonassessable when the corporation receives the consideration specified in the subscription agreement.
(d) If a subscriber defaults in payment of money or property under a subscription agreement entered into before incorporation, the corporation may collect the amount owed as any other debt. Alternatively, unless the subscription agreement provides otherwise, the corporation may terminate the agreement and may sell the shares if the debt remains unpaid more than 10 days after the corporation sends written demand for payment to the subscriber.
(e) A subscription agreement entered into after incorporation is a contract between the subscriber and the corporation subject to Section 10A-2-6.21.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.20; amended and renumbered by Act 2009-513, p. 967, §100.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The powers granted in this section to the board of directors may be reserved to the shareholders by the articles of incorporation.
(b) The board of directors may authorize shares to be issued for consideration consisting of money, labor done or property actually received.
(c) Before the corporation issues shares, the board of directors must determine that the consideration received or to be received before issuance for shares to be issued is adequate. That determination by the board of directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid, and nonassessable.
(d) When the corporation receives the consideration for which the board of directors authorized the issuance of shares, the shares issued therefor are fully paid, and nonassessable.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.21; amended and renumbered by Act 2009-513, p. 967, §100.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A purchaser from a corporation of its own shares is not liable to the corporation or its creditors with respect to the shares except to pay the consideration for which the shares were authorized to be issued or specified in the subscription agreement.
(b) Neither a subscriber nor a shareholder of a corporation is personally liable for the acts or debts of the corporation.
(c) A corporation may have a lien on the shares of its shareholders for any debt or liability incurred to it by the shareholders before notice or transfer of or levy on the shares, if the right to a lien is provided for in the articles of incorporation and is recited conspicuously on its certificates for shares of stock.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.22; amended and renumbered by Act 2009-513, p. 967, §100.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Unless the articles of incorporation provide otherwise, shares may be issued pro rata and without consideration to the corporation’s shareholders of one or more classes or series. An issuance of shares under this subsection is a share dividend.
(b) Shares of one class or series may not be issued as a share dividend in respect of shares of another class or series unless (1) the articles of incorporation so authorize, (2) a majority of the votes entitled to be cast by the class or series to be issued approve the issue, or (3) there are no outstanding shares of the class or series to be issued.
(c) An issuance of shares under this section must also meet the requirements of the Constitution of Alabama of 1901, as the same may be amended from time to time.
(d) If the board of directors does not fix the record date for determining shareholders entitled to a share dividend, it is the date the board of directors authorizes the share dividend.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.23; amended and renumbered by Act 2009-513, p. 967, §100.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Subject to requirements of the Constitution of Alabama of 1901, as the same may be amended from time to time, a corporation may issue rights, options, or warrants for the purchase of shares of the corporation. The board of directors shall determine the terms upon which the rights, options, or warrants are issued, their form and content, and the consideration for which the shares are to be issued.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.24; amended and renumbered by Act 2009-513, p. 967, §100.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Shares or interests in the stock of corporations are personal property, transferable on the books of the corporation in the manner provided by law.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.25; amended and renumbered by Act 2009-513, p. 967, §100.)
Reserved.
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The articles of incorporation, bylaws, an agreement among shareholders, or an agreement between shareholders and the corporation may impose restrictions on the transfer or registration of transfer of shares of corporation. A restriction does not affect shares issued before the restriction was adopted unless the holders of the shares are parties to the restriction agreement or voted in favor of the restriction.
(b) A restriction on the transfer or registration of transfer of shares is valid and enforceable against the holder or a transferee of the holder including an executor, administrator, trustee, guardian, conservator or other fiduciary entrusted with like responsibility for the person or estate of the holder, provided the restriction is authorized by this section and, as provided by Section 10A-1-3.42(d), its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by Section 10A-1-3.45. Even if not so noted, a restriction is enforceable against a person with actual knowledge of the restriction.
(c) A restriction on the transfer or registration of transfer of shares is authorized:
(1) To maintain the corporation’s status when it is dependent on the number or identity of its shareholders; or
(2) To preserve exemptions under federal or state securities law; or
(3) For any other reasonable purpose.
(d) A restriction on the transfer or registration of transfer of shares may include, but shall not be limited to, a restriction that:
(1) Obligates the shareholder first to offer the corporation or other persons, separately, consecutively, or simultaneously, an opportunity to acquire the restricted shares;
(2) Obligates the corporation or other persons, separately, consecutively, or simultaneously, to acquire the restricted shares;
(3) Requires the corporation, the holders of any class of its shares, or another person to approve the transfer of the restricted shares, if the requirement is not manifestly unreasonable;
(4) Prohibits the transfer or registration of the restricted shares to or in the name of designated persons or classes of persons, if the prohibition is not manifestly unreasonable; or
(5) Requires the corporation to refuse to transfer the shares.
(e) For purposes of this section, “shares” includes a security convertible into or carrying a right to subscribe for or acquire shares.
(Acts 1994, No. 94-245, p. 343, §1; Acts 1996, No. 96-742, p. 1241, §6; §10-2B-6.27; amended and renumbered by Act 2009-513, p. 967, §102.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
A corporation may pay the expenses of selling or underwriting its shares, and of organizing or reorganizing the corporation, from the consideration received for shares.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.28; amended and renumbered by Act 2009-513, p. 967, §102.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The shareholders of a corporation have a preemptive right to acquire the corporation’s unissued shares except to the extent the articles of incorporation otherwise provide.
(b) The following principles govern a shareholder’s preemptive rights under this section, except to the extent the articles of incorporation expressly provide otherwise:
(1) The shareholders of the corporation have a preemptive right, granted on uniform terms and conditions prescribed by the board of directors to provide a fair and reasonable opportunity to exercise the right, to acquire proportional amounts of the corporation’s unissued shares upon the decision of the board of directors to issue them.
(2) A shareholder may waive his or her preemptive right. A waiver evidenced by a writing is irrevocable even though it is not supported by consideration.
(3) There is no preemptive right with respect to:
(i) Shares issued as compensation to directors, officers, agents, or employees of the corporation, its subsidiaries or affiliates;
(ii) Shares issued to satisfy conversion or option rights created to provide compensation to directors, officers, agents, or employees of the corporation, its subsidiaries or affiliates; or
(iii) Shares sold otherwise than for money.
(4) Holders of shares of any class without general voting rights but with preferential rights to distributions or assets have no preemptive rights with respect to shares of any class.
(5) Holders of shares of any class with general voting rights but without preferential rights to distributions or assets have no preemptive rights with respect to shares of any class with preferential rights to distributions or assets unless the shares with preferential rights are convertible into or carry a right to subscribe for or acquire shares without preferential rights.
(6) Shares subject to preemptive rights that are not acquired by shareholders may be issued to any person for a period of one year after being offered to shareholders at a consideration set by the board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of one year is subject to the shareholders’ preemptive rights.
(c) For purposes of this section, “shares” include a security convertible into or carrying a right to subscribe for or acquire shares.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.30; amended and renumbered by Act 2009-513, p. 967, §104.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Except as otherwise provided in its articles of incorporation, a corporation may acquire its own shares. Unless the articles of incorporation prohibit their reissuance, shares so acquired shall constitute treasury shares.
(b) If the articles of incorporation prohibit the reissuance of acquired shares, the reacquisition of the shares shall effect a cancellation of them. A statement of cancellation as to the shares shall be filed as provided in Section 10A-2-6.32. The filing of a statement of cancellation with respect to the shares shall constitute an amendment to the corporation’s articles of incorporation reducing the number of shares of the class of shares so canceled that the corporation is authorized to issue by the number of shares so canceled.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.31; amended and renumbered by Act 2009-513, p. 967, §104.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation may at any time, by resolution of its board of directors, and without shareholder action:
(1) Cancel all or any part of the shares of the corporation reacquired by it other than shares the reissuance of which is prohibited by the articles of incorporation, and in the event a statement of cancellation shall be filed under this section; or
(2) File a statement of cancellation with respect to shares the reissuance of which is prohibited by the articles of incorporation.
(b) The statement of cancellation shall be executed by the corporation and delivered to the judge of probate for filing. The statement shall set forth:
(1) The name of the corporation;
(2) The number of reacquired shares canceled by resolution duly adopted by the board of directors, itemized by classes and series, and the date of its adoption;
(3) The aggregate number of issued shares, itemized by classes and series, after giving effect to the cancellation; and
(4) If the articles of incorporation provide that any portion of the canceled shares shall not be reissued, the number of shares which the corporation will have authority to issue itemized by classes and series, after giving effect to the cancellation.
(c) Upon the filing of a statement of cancellation with respect to shares other than shares whose reissuance was prohibited by the articles of incorporation, the shares so canceled shall constitute authorized but unissued shares. The filing of a statement of cancellation with respect to shares the reissuance of which was prohibited by the articles of incorporation shall constitute an amendment of the articles of incorporation reducing the number of shares of the class of shares so canceled that the corporation is authorized to issue by the number of shares so canceled.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.32; amended and renumbered by Act 2009-513, p. 967, §104.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A board of directors may authorize and the corporation may make distributions subject to restriction by the articles of incorporation and the limitation in subsection (c).
(b) If the board of directors does not fix the record date for determining shareholders entitled to a distribution other than one involving a repurchase or reacquisition of shares, it is the date the board of directors authorizes the distribution.
(c) No distribution may be made if, after giving it effect:
(1) The corporation would not be able to pay its debts as they become due in the usual course of business; or
(2) The corporation’s total assets would be less than the sum of its total liabilities plus, unless the articles of incorporation permit otherwise, the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.
(d) The board of directors may base a determination that a distribution is not prohibited under subsection (c) either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair revaluation or other method that is reasonable in the circumstances.
(e) The effect of a distribution under subsection (c) is measured:
(1) In the case of distribution by purchase, redemption, or other acquisition of the corporation’s shares, as of the earlier of (i) the date money or other property is transferred or debt incurred by the corporation or (ii) the date the shareholder ceases to be a shareholder with respect to the acquired shares;
(2) In the case of any other distribution of indebtedness, as of the date the indebtedness is distributed;
(3) In all other cases, as of (i) the date the distribution is authorized if the payment occurs within 120 days after the date of authorization or (ii) the date the payment is made if it occurs more than 120 days after the date of authorization.
(f) A corporation’s indebtedness to a shareholder incurred by reason of a distribution made in accordance with this section is at parity with the corporation’s indebtedness to its general, unsecured creditors except to the extent subordinated by agreement.
(g) Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations under subsection (c) if its terms provide that payment of principal and interest are to be made only if and to the extent that payment of a distribution could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is actually made.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-6.40; amended and renumbered by Act 2009-513, p. 967, §106.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation shall hold a meeting of shareholders annually at a time stated or fixed in accordance with the bylaws.
(b) Annual shareholders’ meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated in or fixed in accordance with the bylaws, annual meetings shall be held at the corporation’s principal office.
(c) The failure to hold an annual meeting at the time stated in or fixed in accordance with a corporation’s bylaws does not affect the validity of any corporate action.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.01; amended and renumbered by Act 2009-513, p. 967, §108.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation shall hold a special meeting of shareholders:
(1) On call of its board of directors or the person or persons authorized to do so by the articles of incorporation or bylaws; or
(2) If the holders of at least 10 percent of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date, and deliver to the corporation’s president or secretary one or more written demands for the meeting describing the purpose or purposes for which it is to be held, who shall, within 21 days of the receipt of demand, cause notice to be given of the meeting to be held within the minimum time following the notice prescribed by Section 10A-2-7.05(a); or
(3) On call of the holders of at least 10 percent of the votes entitled to be cast at the proposed special meeting who signed a demand for a special meeting valid under subdivision (2), if:
(i) Notice of the special meeting was not given within 21 days after the date the demand was delivered to the corporation’s president or secretary; or
(ii) The special meeting was not held in accordance with the notice.
(b) If not otherwise fixed under Section 10A-2-7.03 or 10A-2-7.07, the record date for determining shareholders entitled to demand a special meeting is the date the first shareholder signs the demand.
(c) Special shareholders’ meetings may be held in or out of this state at the place stated in or fixed in accordance with the bylaws. If no place is stated or fixed in accordance with the bylaws, special meetings shall be held at the corporation’s principal office.
(d) Only business within the purpose or purposes described in the meeting notice required by Section 10A-2-7.05(c) may be conducted at a special shareholders’ meeting.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.02; amended and renumbered by Act 2009-513, p. 967, §108.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The circuit court of the county where a corporation’s principal office, or, if none in this state, its registered office, is located may summarily order a meeting to be held:
(1) On application of any shareholder of the corporation entitled to participate in an annual meeting if an annual meeting was not held within the earlier of 12 months after the end of the fiscal year or 15 months after its last annual meeting; or
(2) On application of a shareholder who signed a demand for a special meeting valid under Section 10A-2-7.02, if:
(i) Notice of the special meeting was not given within 30 days after the date the demand was delivered to the corporation’s president or secretary; or
(ii) The special meeting was not held in accordance with the notice.
(b) The court may fix the time and place of the meeting, determine the shares entitled to participate in the meeting, specify a record date for determining shareholders entitled to notice of and to vote at the meeting, prescribe the form and content of the meeting notice, fix the quorum required for specific matters to be considered at the meeting, or direct that the votes represented at the meeting constitute a quorum for action on those matters, and enter other orders necessary to accomplish the purpose or purposes of the meeting.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.03; amended and renumbered by Act 2009-513, p. 967, §108.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Except as provided in the articles of incorporation, action required or permitted by the Constitution of Alabama of 1901 or by this chapter to be taken at a shareholders’ meeting may be taken without a meeting if the action is taken by all shareholders entitled to vote on the action. The action must be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action, and delivered to the corporation for inclusion in the minutes or filing with the corporate records.
(b) If not otherwise fixed under Section 10A-2-7.03 or 10A-2-7.07, the record date for determining shareholders entitled to take action without a meeting is the date the first shareholder signs the consent under subsection (a).
(c) A consent signed under this section has the effect of a meeting vote and may be described as in any document.
(d) If this chapter requires that notice of proposed action be given to nonvoting shareholders and the action is to be taken by unanimous consent of the voting shareholders, the corporation must give its nonvoting shareholders written notice of the proposed action at least 10 days before the action is taken. The notice must contain or be accompanied by the same material that, under this chapter, would have been required to be sent to nonvoting shareholders in a notice of meeting at which the proposed action would have been submitted to the shareholders for action.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.04; amended and renumbered by Act 2009-513, p. 967, §108.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation, or, in the case of a special meeting called pursuant to Section 10A-2-7.02(a)(3), the persons calling the meeting, shall notify shareholders in writing of the date, time, and place of each annual and special shareholders’ meeting no fewer than 10 nor more than 60 days before the meeting date. Unless this chapter or the articles of incorporation require otherwise, the corporation, or other persons calling the meeting, are required to give notice only to shareholders entitled to vote at the meeting. Notwithstanding the provisions of this section or any other provisions of this chapter, the stock or bonded indebtedness of a corporation shall not be increased at a meeting unless notice of the meeting shall have been given as may be required by Section 234 of the Constitution of Alabama of 1901, as the same may be amended from time to time.
(b) Unless this chapter or the articles of incorporation require otherwise, notice of an annual meeting need not include a statement of the purpose or purposes for which the meeting is called.
(c) Notice of a special meeting must include a statement of the purpose or purposes for which the meeting is called.
(d) If not otherwise fixed under Section 10A-2-7.03 or 10A-2-7.07, the record date for determining shareholders entitled to notice of and to vote at an annual or special shareholders’ meeting is the day before the first notice is delivered to shareholders.
(e) Unless the bylaws require otherwise, if an annual or special shareholders’ meeting is adjourned to a different date, time, or place, notice need not be given of the new date, time, or place if the new date, time, or place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must be fixed under Section 10A-2-7.07, however, notice of the adjourned meeting must be given under this section to persons who are shareholders as of the new record date.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.05; amended and renumbered by Act 2009-513, p. 967, §108.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A shareholder may waive any notice required by the Constitution of Alabama of 1901, this title or this chapter, the articles of incorporation, or bylaws before or after the date and time stated in the notice. The waiver must be in writing, be signed by the shareholder entitled to the notice, and be delivered to the corporation for inclusion in the minutes or filing with the corporate records.
(b) A shareholder’s attendance at a meeting:
(1) Waives objection to lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting;
(2) Waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter before action is taken on the matter.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.06; amended and renumbered by Act 2009-513, p. 967, §108.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The bylaws may fix or provide the manner of fixing the record date for one or more voting groups in order to determine the shareholders entitled to notice of a shareholders’ meeting, to demand a special meeting, to vote, or to take any other action. If the bylaws do not fix or provide for fixing a record date, the board of directors of the corporation may fix a future date as the record date.
(b) A record date fixed under this section may not be more than 70 days before the meeting or action requiring a determination of shareholders.
(c) A determination of shareholders entitled to notice of or to vote at a shareholders’ meeting is effective for any adjournment of the meeting unless the board of directors fixes a new record date, which it must do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.
(d) If a court orders a meeting adjourned to a date more than 120 days after the date fixed for the original meeting, it may provide that the original record date continues in effect or it may fix a new record date.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.07; amended and renumbered by Act 2009-513, p. 967, §108.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) After fixing a record date for a meeting, a corporation shall prepare an alphabetical list of the names of all its shareholders who are entitled to notice of a shareholders’ meeting. The list must be arranged by voting group, and within each voting group by class or series of shares, and show the address of and number of shares held by each shareholder.
(b) The shareholders’ list must be available for inspection by any shareholder, beginning two business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the corporation’s principal office or, if the corporation’s principal office is located outside this state, at its registered office. A shareholder, his or her agent, or attorney is entitled on written demand to inspect and, for a proper purpose, to copy the list, during regular business hours and at his or her expense, during the period it is available for inspection.
(c) The corporation shall make the shareholders’ list available at the meeting, and any shareholder, his or her agent, or attorney is entitled to inspect the list at any time during the meeting or any adjournment.
(d) If the corporation refuses to allow a shareholder, his or her agent, or attorney to inspect the shareholders’ list before or at the meeting, or copy the list as permitted by subsection (b), the circuit court of the county where a corporation’s principal office, or, if none in this state, its registered office, is located, on application of the shareholder, may summarily order the inspection or copying at the corporation’s expense, may postpone the meeting for which the list was prepared until the inspection or copying is complete, and shall order the corporation to pay the shareholder’s costs, including reasonable counsel fees, incurred in obtaining the order in the same circumstances and subject to the same defense as applicable to orders to pay costs under Section 10A-2-16.04(c).
(e) Refusal or failure to prepare or make available the shareholders’ list does not affect the validity of action taken at the meeting.
(f) The stock transfer records of the corporation shall be prima facie evidence as to who are the shareholders entitled to examine the shareholders’ list or transfer records or to vote at any meeting of shareholders.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.20; amended and renumbered by Act 2009-513, p. 967, §110.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Except as provided in subsections (b) and (c) or unless the articles of incorporation provide otherwise, each outstanding share, regardless of class, is entitled to one vote on each matter voted on at a shareholders’ meeting. Only shares are entitled to vote.
(b) The shares of a corporation are not entitled to vote if they are owned, directly or indirectly, by a second corporation, domestic or foreign, and the first corporation owns, directly or indirectly, a majority of the shares entitled to vote for directors of the second corporation, unless a court of competent jurisdiction determines that the voting of the shares is not for the purpose of perpetuation of management or other improper purpose.
(c) Subsection (b) does not limit the power of a corporation to vote any shares, including its own shares, held by it in a fiduciary capacity.
(d) Redeemable shares are not entitled to vote after notice of redemption is mailed to the holders and a sum sufficient to redeem the shares has been deposited with a bank, trust company, or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the shares.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.21; amended and renumbered by Act 2009-513, p. 967, §110.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A shareholder may vote his or her shares in person or by proxy. An electronic transmission must contain or be accompanied by information from which one can reasonably determine that the shareholder authorized the transmission and that it is the shareholder who actually votes or corresponds on the transmission.
(b) A shareholder or his or her agent or attorney-in-fact may appoint a proxy to vote or otherwise act for him or her by signing an appointment form or by means of an electronic transmission. An electronic transmission must contain or be accompanied by information from which one can determine that the shareholder, the shareholder’s agent, or the shareholder’s attorney-in-fact authorized the transmission.
(c) An appointment of a proxy is effective when a signed appointment form or an electronic transmission of the appointment is received by the secretary or other officer or agent authorized to tabulate votes. An appointment is valid for 11 months unless a longer period is expressly provided in the appointment form.
(d) An appointment of a proxy is revocable by the shareholder unless the appointment form or electronic transmission conspicuously states that it is irrevocable and the appointment is coupled with an interest. Appointments coupled with an interest include the appointment of:
(1) A pledgee;
(2) A person who purchased or agreed to purchase the shares;
(3) A creditor of the corporation who extended it credit under terms requiring the appointment;
(4) An employee of the corporation whose employment contract requires the appointment; or
(5) A party to a voting agreement created under Section 10A-2-7.31.
(e) The revocation of an appointment or the death or incapacity of the shareholder appointing a proxy does not affect the right of the corporation to accept the proxy’s authority unless notice of the revocation, death, or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises his or her authority under the appointment.
(f) An appointment made irrevocable under subsection (d) is revoked when the interest with which it is coupled is extinguished.
(g) A transferee for value of shares subject to an irrevocable appointment may revoke the appointment if he or she did not know of its existence when he or she acquired the shares and the existence of the irrevocable appointment was not noted conspicuously on the certificate representing the shares.
(h) Subject to Section 10A-2-7.24 and to any express limitation on the proxy’s authority stated in the appointment form or electronic transmission, a corporation is entitled to accept the proxy’s vote or other action as that of the shareholder making the appointment.
(i) Nothing in this section shall be construed as limiting, or extending, authority granted under a durable power of attorney as provided in Section 26-1-2.
(Acts 1994, No. 94-245, p. 343, §1; Act 2006-564, p. 1307, §3; §10-2B-7.22; amended and renumbered by Act 2009-513, p. 967, §110; Act 2009-634, p. 1945, §1.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation may establish a procedure by which the beneficial owner of shares that are registered in the name of a nominee is recognized by the corporation as the shareholder. The extent of this recognition may be determined in the procedure.
(b) The procedure may set forth:
(1) The types of nominees to which it applies;
(2) The rights or privileges that the corporation recognizes in a beneficial owner;
(3) The manner in which the procedure is selected by the nominee;
(4) The information that must be provided when the procedure is selected;
(5) The period for which selection of the procedure is effective; and
(6) Other aspects of the rights and duties created.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.23; amended and renumbered by Act 2009-513, p. 967, §110.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If the name signed on, or otherwise submitted by means of an electronic transmission with respect to, a vote, consent, waiver, or proxy appointment corresponds to the name of a shareholder, the corporation if acting in good faith is entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder.
(b) If the name signed on, or otherwise submitted by means of an electronic transmission with respect to, a vote, consent, waiver, or proxy appointment does not correspond to the name of its shareholder, the corporation if acting in good faith is nevertheless entitled to accept the vote, consent, waiver, or proxy appointment and give it effect as the act of the shareholder if:
(1) The shareholder is an entity and the name signed or otherwise submitted by means of an electronic transmission purports to be that of an officer or agent of the entity;
(2) The name signed or otherwise submitted by means of an electronic transmission purports to be that of an administrator, executor, guardian, or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
(3) The name signed or otherwise submitted by means of an electronic transmission purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of his or her status acceptable to the corporation has been presented with respect to the vote, consent, waiver, or proxy appointment;
(4) The name signed or otherwise submitted by means of an electronic transmission purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory’s authority to sign for the shareholder has been presented with respect to the vote, consent, waiver, or proxy appointment; or
(5) Two or more persons are the shareholder as cotenants or fiduciaries and the name signed or otherwise submitted by means of an electronic transmission purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all co-owners.
(c) The corporation is entitled to reject a vote, consent, waiver, or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or otherwise submitted with respect thereto by means of an electronic transmission or about the signatory’s authority to sign for, or otherwise submit by means of an electronic transmission on behalf of, the shareholder.
(d) The corporation and its officer or agent who accepts or rejects a vote, consent, waiver, or proxy appointment in good faith and in accordance with the standards of this section or subsection (b) of Section 10A-2-7.22 are not liable in damages to the shareholder for the consequences of the acceptance or rejection.
(e) Corporate action based on the acceptance or rejection of a vote, consent, waiver, or proxy appointment under this section is valid unless a court of competent jurisdiction determines otherwise.
(Acts 1994, No. 94-245, p. 343, §1; Act 2006-564, p. 1307, §3; §10-2B-7.24; amended and renumbered by Act 2009-513, p. 967, §110.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless the articles of incorporation or this chapter provide otherwise, a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter, but in no event shall a quorum consist of less than one-third of the votes entitled to be cast on the matter by the voting group.
(b) Once a share is represented for any purpose at a meeting, it is, unless established to the contrary, presumed present for quorum purposes for the remainder of the meeting.
(c) If a quorum is present when a vote is taken, action on a matter, other than the election of directors, by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the Constitution of Alabama of 1901, as the same may be amended from time to time, the articles of incorporation, or this chapter require a greater number of affirmative votes.
(d) An amendment of articles of incorporation adding, changing, or deleting a quorum or voting requirement for a voting group greater than specified in subsection (a) or (c) is governed by Section 10A-2-7.27.
(e) The election of directors is governed by Section 10A-2-7.28.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.25; amended and renumbered by Act 2009-513, p. 967, §110.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If the articles of incorporation or this chapter provide for voting by a single voting group on a matter, action on that matter is taken when voted upon by that voting group as provided in Section 10A-2-7.25.
(b) If the articles of incorporation or this chapter provide for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately as provided in Section 10A-2-7.25. Action may be taken by one voting group on a matter even though no action is taken by another group entitled to vote on the matter.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.26; amended and renumbered by Act 2009-513, p. 967, §110.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The articles of incorporation may provide for a greater quorum or voting requirement for shareholders, or voting groups of shareholders, than is provided for by this title or this chapter.
(b) An amendment to the articles of incorporation that adds, changes, or deletes a greater quorum or voting requirement must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.27; amended and renumbered by Act 2009-513, p. 967, §110.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Unless otherwise provided in the articles of incorporation, directors are elected by a majority of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present when the vote is taken.
(b) Shareholders do not have a right to cumulate their votes for directors unless the articles of incorporation so provide.
(c) A statement included in the articles of incorporation that “[all] [a designated voting group of] shareholders are entitled to cumulate their votes for directors,” or words of similar import, means that the shareholders designated are entitled to multiply the number of votes they are entitled to cast by the number of directors for whom they are entitled to vote and cast the product for a single candidate or distribute the product among two or more candidates.
(d) Shares otherwise entitled to vote cumulatively may not be voted cumulatively at a particular meeting unless:
(1) The meeting notice or proxy statement accompanying the notice states conspicuously that cumulative voting is authorized; or
(2) A shareholder who has the right to cumulate his or her votes gives notice to the corporation not less than 48 hours before the time set for the meeting of his or her intent to cumulate his or her votes during the meeting, and if one shareholder gives this notice all other shareholders in the same voting group participating in the election are entitled to cumulate their votes without giving further notice.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.28; amended and renumbered by Act 2009-513, p. 967, §110.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) One or more shareholders may create a voting trust, conferring on a trustee the right to vote or otherwise act for them, by signing an agreement setting out the provisions of the trust, which may include anything consistent with its purpose, and transferring their shares to the trustee. When a voting trust agreement is signed, the trustee shall prepare a list of the names and addresses of all owners of beneficial interests in the trust, together with the number and class of shares each transferred to the trust, and deliver copies of the list and agreement to the corporation’s principal office.
(b) A voting trust becomes effective on the date the first shares subject to the trust are registered in the trustee’s name. A voting trust is valid for not more than 10 years after its effective date unless extended under subsection (c).
(c) All or some of the parties to a voting trust may extend it for additional terms of not more than 10 years each by signing an extension agreement and obtaining the voting trustee’s written consent to the extension. Any extension is valid from the date the first shareholder signs the extension agreement. The voting trustee must deliver copies of the extension agreement and list of beneficial owners to the corporation’s principal office. An extension agreement binds only those parties signing it.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.30; amended and renumbered by Act 2009-513, p. 967, §112.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Two or more shareholders may provide for the manner in which they will vote their shares by signing an agreement for that purpose. A voting agreement created under this section is not subject to the provisions of Section 10A-2-7.30.
(b) A voting agreement created under this section is specifically enforceable.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.31; amended and renumbered by Act 2009-513, p. 967, §112.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) An agreement among the shareholders of a corporation that complies with this section is effective among the shareholders and the corporation even though it is inconsistent with one or more provisions of this chapter in that it:
(1) Eliminates the authority of the board of directors or restricts the discretion or powers of the board of directors;
(2) Governs the authorization or making of distributions whether or not in proportion to ownership of shares, subject to the limitations in Section 10A-2-6.40;
(3) Establishes who shall be directors or officers of the corporation, or their terms of office or manner of selection or removal;
(4) Governs, in general or in regard to specific matters, the exercise or division of voting power by or between the shareholders and directors or by or among any of them, including use of weighted voting rights or director proxies;
(5) Establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any shareholder, director, officer, or employee of the corporation or among any of them;
(6) Transfers to one or more shareholders or other persons all or part of the authority to exercise the corporate powers or to manage the business and affairs of the corporation, including the resolution of any issue about which there exists a deadlock among directors or shareholders;
(7) Requires dissolution of the corporation at the request of one or more of the shareholders or upon the occurrence of a specified event or contingency; or
(8) Otherwise governs the exercise of the corporate powers or the management of the business and affairs of the corporation or the relationship among the shareholders, the directors and the corporation, or among any of them, and is not contrary to public policy.
(b) An agreement authorized by this section shall be:
(1) Set forth (A) in the articles of incorporation or bylaws and approved by all persons who are shareholders at the time of the agreement or (B) in a written agreement that is signed by all persons who are shareholders at the time of the agreement and is made known to the corporation; and
(2) Subject to amendment only by all persons who are shareholders at the time of the amendment, unless the agreement provides otherwise.
(c) The existence of an agreement authorized by this section shall be noted conspicuously on the front or back of each certificate for outstanding shares. If at the time of the agreement the corporation has shares outstanding represented by certificates, the corporation shall recall the outstanding certificates and either add the notation or issue substitute certificates that comply with this subsection. The failure to note the existence of the agreement on the certificate shall not affect the validity of the agreement or any action taken pursuant to it. Any purchaser of shares who, at the time of purchase, did not have knowledge of the existence of the agreement shall be entitled to recision of the purchase. A purchaser shall be deemed to have knowledge of the existence of the agreement if its existence is noted on the certificate for the shares in compliance with this subsection. An action to enforce the right of recision authorized by this subsection must be commenced within the earlier of 90 days after discovery of the existence of the agreement or two years after the time of purchase of the shares.
(d) An agreement authorized by this section shall cease to be effective when shares of the corporation are listed on a national securities exchange or regularly traded in a market maintained by one or more members of a national or affiliated securities association. If the agreement ceases to be effective for any reason, the board of directors may, if the agreement is contained or referred to in the corporation’s articles of incorporation or bylaws, adopt an amendment of the articles of incorporation or bylaws, without shareholder action, to delete the agreement and any references to it.
(e) An agreement authorized by this section that limits the discretion or powers of the board of directors shall relieve the directors of, and impose upon the person or persons in whom the discretion or powers are vested, liability for acts or omissions imposed by law on directors to the extent that the discretion or powers of the directors are limited by the agreement.
(f) The existence or performance of an agreement authorized by this section shall not be a ground for imposing personal liability on any shareholder for the acts or debts of the corporation even if the agreement or its performance treats the corporation as if it were a partnership or results in failure to observe the corporate formalities otherwise applicable to the matters governed by the agreement.
(g) Incorporators or subscribers for shares may act as shareholders with respect to an agreement authorized by this section if no shares have been issued when the agreement is made.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-7.32; amended and renumbered by Act 2009-513, p. 967, §112.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
A corporation may treat an infant who holds stock or other securities of the corporation in his or her own name as having capacity to vote or to give consent in person or by proxy in respect thereof, to transfer and to convey the same and to make elections and exercise rights relating to the stock or securities, unless the corporation has notice of the infancy by delivery to it or to its transfer agent of a written notice stating that the holder is an infant.
(Acts 1957, No. 546, p. 766, §1; §10-6-1; amended and renumbered by Act 2009-513, p. 967, §114.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
An infant holder of stock or other securities of a corporation, having voted or given consent in respect thereto, having transferred or conveyed the stock or securities or having made an election or exercised a right relating to the stock or security, shall have no right thereafter to disaffirm or avoid, as against the corporation, any act on his or her part unless, prior to the receipt, vote or consent, the making of the election or the exercise of the right, the corporation had written notice of the infancy by delivery to it or to its transfer agent of a written notice stating that the holder was an infant.
(Acts 1957, No. 546, p. 766, §2; §10-6-2; amended and renumbered by Act 2009-513, p. 967, §114.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
An infant may in his or her own right receive dividends in respect of the stock or securities standing in his or her name on the books of the corporation, and the receipt shall constitute a valid and sufficient release and discharge of the corporation for the dividends paid to the infant stockholder, notwithstanding that the corporation may have actual or written notice of the infancy of the holder of its stock or securities.
(Acts 1957, No. 546, p. 766, §3; §10-6-3; amended and renumbered by Act 2009-513, p. 967, §114.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Nothing contained in this chapter shall be construed to in anywise affect the provisions of the “Alabama Uniform Transfers to Minors Act” or similar statutes.
(Acts 1957, No. 546, p. 766, §4; §10-6-4; amended and renumbered by Act 2009-513, p. 967, §114.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Each corporation must have a board of directors.
(b) All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, its board of directors, subject to any limitation set forth in the articles of incorporation or in an agreement authorized under Section 10A-2-7.32.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.01; amended and renumbered by Act 2009-513, p. 967, §116.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
The articles of incorporation or bylaws may prescribe qualifications for directors. A director shall be a natural person of the age of at least nineteen (19) years but need not be a resident of this state or a shareholder of the corporation unless the articles of incorporation or bylaws so prescribe.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.02; amended and renumbered by Act 2009-513, p. 967, §116.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The number of directors shall be one or more, as specified in or fixed in accordance with the articles of incorporation or bylaws.
(b) If a board of directors has power to fix or change the number of directors, the board may increase or decrease by 30 percent or less the number of directors last approved by the shareholders, but only the shareholders may increase or decrease by more than 30 percent the number of directors last approved by the shareholders.
(c) The articles of incorporation or bylaws may establish a variable range for the size of the board of directors by fixing a minimum and maximum number of directors. If a variable range is established, the number of directors may be fixed or changed from time to time, within the minimum and maximum, by the shareholders, or, if the articles of incorporation so provide, by the board of directors. After shares are issued, only the shareholders may change the range for the size of the board or change from a fixed to a variable-range size board or vice versa.
(d) Directors are elected at the first annual shareholder’s meeting and at each annual meeting thereafter unless their terms are staggered under Section 10A-2-8.06.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.03; amended and renumbered by Act 2009-513, p. 967, §116.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
If the articles of incorporation authorize dividing the shares into classes, the articles may also authorize the election of all or a specified number of directors by the holders of one or more authorized classes of shares. A class, or classes, of shares entitled to elect one or more directors is a separate voting group for purposes of the election of directors.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.04; amended and renumbered by Act 2009-513, p. 967, §116.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The terms of the initial directors of a corporation expire at the first shareholders’ meeting at which directors are elected.
(b) The terms of all other directors expire at the next annual shareholders’ meeting following their election unless their terms are staggered under Section 10A-2-8.06.
(c) A decrease in the number of directors does not shorten an incumbent director’s term.
(d) The term of a director elected to fill a vacancy expires at the next shareholders’ meeting at which directors are elected.
(e) Despite the expiration of a director’s term, he or she continues to serve until his or her successor is elected and qualified or until there is a decrease in the number of directors.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.05; amended and renumbered by Act 2009-513, p. 967, §116.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
If there are nine or more directors, the articles of incorporation may provide for staggering their terms by dividing the total number of directors into two or three groups, with each group containing one-half or one-third of the total, as near as may be. In that event, the terms of directors in the first group expire at the first annual shareholders’ meeting after their election, the terms of the second group expire at the second annual shareholders’ meeting after their election, and the terms of the third group, if any, expire at the third annual shareholders’ meeting after their election. At each annual shareholders’ meeting held thereafter, directors shall be chosen for a term of two years or three years, as the case may be, to succeed those whose terms expire.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.06; amended and renumbered by Act 2009-513, p. 967, §116.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A director may resign at any time by delivering written notice to the board of directors, its chair, or to the corporation.
(b) A resignation is effective when the notice is delivered unless the notice specifies a later effective date.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.07; amended and renumbered by Act 2009-513, p. 967, §116.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The shareholders may remove one or more directors with or without cause unless the articles of incorporation provide that directors may be removed only for cause.
(b) If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him or her.
(c) If cumulative voting is authorized, a director may not be removed if the number of votes sufficient to elect him or her under cumulative voting is voted against his or her removal. If cumulative voting is not authorized, a director may be removed only if the number of votes cast to remove him or her exceeds the number of votes cast not to remove him or her.
(d) A director may be removed by the shareholders only at a meeting called for the purpose of removing him or her and the meeting notice must state that the purpose, or one of the purposes, of the meeting is the removal of the director.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.08; amended and renumbered by Act 2009-513, p. 967, §116.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The circuit court of the county where a corporation’s principal office, or, if none in this state, its registered office, is located may remove a director of the corporation from office in a proceeding commenced either by the corporation or by its shareholders holding at least 10 percent of the outstanding shares of any class if the court finds that (1) the director engaged in fraudulent or dishonest conduct, or gross abuse of authority or discretion, with respect to the corporation and (2) removal is in the best interest of the corporation.
(b) The court that removes a director may bar the director from reelection for a period prescribed by the court.
(c) If shareholders commence a proceeding under subsection (a), they shall make the corporation a party defendant.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.09; amended and renumbered by Act 2009-513, p. 967, §116.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Unless the articles of incorporation provide otherwise, if a vacancy occurs on a board of directors:
(1) The shareholders may fill the vacancy, whether resulting from an increase in the number of directors or otherwise; or
(2) The board of directors may fill the vacancy, except that the directors shall have the power to fill a vacancy resulting from an increase in the number of directors only if expressly provided for in the articles of incorporation; or
(3) If the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy, if it is one that the directors are authorized to fill, by the affirmative vote of a majority of all the directors remaining in office.
(b) If the vacant office was held by a director elected by a voting group of shareholders, only the holders of shares of that voting group are entitled to vote to fill the vacancy if it is filled by the shareholders.
(c) A vacancy that will occur at a specific later date, by reason of a resignation effective at a later date under Section 10A-2-8.07(b) or otherwise, may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.10; amended and renumbered by Act 2009-513, p. 967, §116.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Unless the articles of incorporation or bylaws provide otherwise, the board of directors may fix the compensation of directors.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.11; amended and renumbered by Act 2009-513, p. 967, §116.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The board of directors may hold regular or special meetings in or out of this state.
(b) Unless the articles of incorporation or bylaws provide otherwise, the board of directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.20; amended and renumbered by Act 2009-513, p. 967, §118.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Unless the articles of incorporation or bylaws provide otherwise, action required or permitted by this chapter to be taken at a board of directors’ meeting may be taken without a meeting if the action is taken by all members of the board. The action must be evidenced by one or more written consents describing the action taken, signed by each director, and included in the minutes or filed with the corporate records reflecting the action taken.
(b) Action taken under this section is effective when the last director signs the consent, unless the consent specifies a different effective date.
(c) A consent signed under this section has the effect of a meeting vote and may be so described in any document.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.21; amended and renumbered by Act 2009-513, p. 967, §118.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Regular meetings of the board of directors may be held with or without notice as prescribed in the bylaws.
(b) Unless the articles of incorporation or bylaws provide for a longer or shorter period, special meetings of the board of directors must be preceded by at least two days’ notice of the date, time, and place of the meeting. The notice need not describe the purpose of the special meeting unless required by the articles of incorporation or bylaws.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.22; amended and renumbered by Act 2009-513, p. 967, §118.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A director may waive any notice required by this chapter, the articles of incorporation, or bylaws before or after the date and time stated in the notice. Except as provided by subsection (b), the waiver must be in writing, signed by the director entitled to notice, and filed with the minutes or corporate records.
(b) A director’s attendance at or participation in a meeting:
(1) Waives objection to lack of any required notice to him or her or defective notice of the meeting unless the director at the beginning of the meeting (or promptly upon his or her arrival) objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting, and
(2) Waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the director objects to considering the matter before action is taken on the matter.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.23; amended and renumbered by Act 2009-513, p. 967, §118.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Unless the articles of incorporation or bylaws require a greater number, a quorum of a board of directors consists of:
(1) A majority of the fixed number of directors if the corporation has a fixed board size; or
(2) A majority of the fixed number of directors prescribed, or if no number is prescribed the number in office immediately before the meeting begins, if the corporation has a variable-range size board.
(b) The articles of incorporation or bylaws may authorize a quorum of a board of directors to consist of no fewer than one-third of the fixed or prescribed number of directors determined under subsection (a).
(c) If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board of directors unless the articles of incorporation or bylaws require the vote of a greater number of directors. A director is, unless established to the contrary, presumed present for quorum purposes for the remainder of a meeting at which he or she has been present for any purpose.
(d) A director who is present at a meeting of the board of directors or a committee of the board of directors when corporate action is taken is deemed to have assented to the action taken unless: (1) he or she objects at the beginning of the meeting, or promptly upon his or her arrival, to holding it or transacting business at the meeting or, as to a matter required under the articles of incorporation or the bylaws to be included in the notice of the purpose of the meeting, he or she objects before action is taken on the matter; (2) his or her dissent or abstention from action taken is entered in the minutes of the meeting; or (3) he or she delivers written notice of his or her dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.24; amended and renumbered by Act 2009-513, p. 967, §118.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Unless the articles of incorporation or bylaws provide otherwise, a board of directors may create one or more committees and appoint members of the board of directors to serve on them. Each committee may have one or more members, who serve at the pleasure of the board of directors.
(b) The creation of a committee and appointment of members to it must be approved by the greater of (1) a majority of all the directors in office when the action is taken or (2) the number of directors required by the articles of incorporation or bylaws to take action under Section 10A-2-8.24.
(c) Sections 10A-2-8.20 through 10A-2-8.24, which govern meetings, action without meetings, notice and waiver of notice, and quorum and voting requirements of the board of directors, apply to committees and their members as well.
(d) To the extent specified by the board of directors or in the articles of incorporation or bylaws, each committee may exercise the authority of the board of directors under Section 10A-2-8.01.
(e) A committee may not however:
(1) Authorize distributions;
(2) Approve or propose to shareholders action that this chapter requires be approved by shareholders;
(3) Fill vacancies on the board of directors or on any of its committees;
(4) Amend articles of incorporation pursuant to Section 10A-2-10.02;
(5) Adopt, amend, or repeal bylaws;
(6) Approve a plan of merger not requiring shareholder approval;
(7) Authorize or approve reacquisition of shares, except according to formula or method prescribed by the board of directors; or
(8) Authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences, and limitations of a class or series of shares, except that the board of directors may authorize a committee, or a senior executive officer of the corporation, to do so within limits specifically prescribed by the board of directors.
(f) The creation of, delegation of authority to, or action by a committee does not alone constitute compliance by a director with the standards of conduct described in Section 10A-2-8.30.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.25; amended and renumbered by Act 2009-513, p. 967, §118.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A director shall discharge his or her duties as a director, including duties as a member of a committee:
(1) In good faith;
(2) With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and
(3) In a manner the director believes to be in the best interests of the corporation.
(b) In discharging his or her duties, a director is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
(1) One or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the matters;
(2) Legal counsel, public accountants, certified public accountants, or other persons as to matters the director reasonably believes are within the person’s professional or expert competence; or
(3) A committee of the board of directors of which he or she is not a member if the director reasonably believes the committee merits confidence.
(c) A director is not acting in good faith if he or she has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (b) unwarranted.
(d) A director is not liable for any action taken as a director, or any failure to take any action, if the director performed the duties of his or her office in compliance with this section.
(e) The above standards are subject to any provision of the articles of incorporation that may be adopted pursuant to Section 10A-2-2.02(b)(3).
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.30; amended and renumbered by Act 2009-513, p. 967, §120.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Neither an unqualified statement of rights or powers, nor an unqualified grant of authority in this chapter, shall be taken or construed to abrogate, repeal, displace, modify or impair the fiduciary obligations of directors or other officers or employees of a corporation, or of shareholders having or exercising control thereof, or any function thereof, whether by reason of ownership of a majority, or other controlling, interest therein, or otherwise, or the jurisdiction of the courts to grant relief by way of injunction or otherwise, in order to forestall, prevent, correct, remedy or allow damages for fraud, oppression, imposition or other inequitable or remedial conduct in conformity with the applicable principles and practices of law.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.31; amended and renumbered by Act 2009-513, p. 967, §120.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
No president, director, or managing officer of any corporation, by whatsoever name or title he or she may be known or called, shall do or omit to do any act, or shall make any declaration or statement in writing, or otherwise, with the intent to depreciate the market value of the stock or bonds of the corporation, and with the further intent to enable the president, director, or other managing officer, or any other person, to buy any stock or bonds at less than the real value thereof.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.32; amended and renumbered by Act 2009-513, p. 967, §120.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Unless he or she complies with the applicable standards of conduct described in Section 10A-2-8.30, a director who votes for or assents to a distribution made in violation of this chapter or the articles of incorporation is personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating this chapter or the articles of incorporation.
(b) A director held liable for an unlawful distribution under subsection (a) is entitled to contribution:
(1) From every other director who voted for or assented to the distribution without complying with the applicable standards of conduct described in Section 10A-2-8.30, and
(2) From each shareholder for the amount the shareholder accepted knowing the distribution was made in violation of this chapter or the articles of incorporation.
(c) A proceeding under subsection (a) is barred unless it is commenced within three years after the date on which the effect of the distribution was measured under Section 10A-2-6.40.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.33; amended and renumbered by Act 2009-513, p. 967, §120.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation has the officers described in its bylaws or appointed by the board of directors in accordance with the bylaws.
(b) A duly appointed officer may appoint one or more officers or assistant officers if authorized by the bylaws or the board of directors.
(c) The bylaws or the board of directors shall delegate to one of the officers responsibility for preparing minutes of the directors’ and shareholders’ meetings and for authenticating records of the corporation.
(d) Unless the bylaws provide otherwise, the same individual may simultaneously hold more than one office in a corporation.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.40; amended and renumbered by Act 2009-513, p. 967, §122.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Each officer has the authority and shall perform the duties set forth in the bylaws or, to the extent consistent with the bylaws, the duties prescribed by the board of directors or by direction of an officer authorized by the board of directors to prescribe the duties of other officers.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.41; amended and renumbered by Act 2009-513, p. 967, §122.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) An officer with discretionary authority shall discharge his or her duties under that authority:
(1) In good faith;
(2) With the care an ordinarily prudent person in a like position would exercise under similar circumstances; and
(3) In a manner he or she reasonably believes to be in the best interests of the corporation.
(b) In discharging his or her duties an officer is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, if prepared or presented by:
(1) One or more officers or employees of the corporation whom the officer reasonably believes to be reliable and competent in the matters presented; or
(2) Legal counsel, public accountants, certified public accountants, or other persons as to matters the officer reasonably believes are within the person’s professional or expert competence.
(c) An officer is not acting in good faith if he or she has knowledge concerning the matter in question that makes reliance otherwise permitted by subsection (b) unwarranted.
(d) An officer is not liable for any action taken as an officer, or any failure to take any action, if he or she performed the duties of his or her office in compliance with this section.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.42; amended and renumbered by Act 2009-513, p. 967, §122.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) An officer may resign at any time by giving notice to the corporation. A resignation is effective when the notice is given unless the notice specifies a later effective date. If a resignation is made effective at a later date and the corporation accepts the future effective date, its board of directors may fill the pending vacancy before the effective date if the board of directors provides that the successor does not take office until the effective date.
(b) A board of directors may remove any officer at any time with or without cause.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.43; amended and renumbered by Act 2009-513, p. 967, §122.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The appointment of an officer does not itself create contract rights.
(b) An officer’s removal does not affect the officer’s contract rights, if any, with the corporation. An officer’s resignation does not affect the officer’s contract rights, if any, with the corporation.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.44; amended and renumbered by Act 2009-513, p. 967, §122.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
In this division:
(1) “Corporation” includes any domestic or foreign predecessor entity of a corporation in a merger or other transaction in which the predecessor’s existence ceased upon consummation of the transaction.
(2) “Director” means an individual who is or was a director of a corporation or an individual who, while a director of a corporation, is or was serving at the corporation’s request as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise. A director is considered to be serving an employee benefit plan at the corporation’s request if his or her duties to the corporation also impose duties on, or otherwise involve services by, the director to the plan or to participants in or beneficiaries of the plan. “Director” includes, unless the context requires otherwise, the estate or personal representative of a director.
(3) “Expenses” include counsel fees.
(4) “Liability” means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or reasonable expenses incurred with respect to a proceeding.
(5) “Official capacity” means (i) when used with respect to a director, the office of director in a corporation; and (ii) when used with respect to an individual other than a director, as contemplated in Section 10A-2-8.56, the office in a corporation held by an officer or the employment or agency relationship undertaken by the employee or agent on behalf of the corporation. “Official capacity” does not include service for any other foreign or domestic corporation or any partnership, joint venture, trust, employee benefit plan, or other enterprise.
(6) “Party” includes an individual who was, is or is threatened to be made a named defendant or respondent in a proceeding.
(7) “Proceeding” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative and whether formal or informal.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.50; amended and renumbered by Act 2009-513, p. 967, §124.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Except as provided in subsection (d), a corporation may indemnify an individual made a party to a proceeding because he or she is or was a director against liability incurred in the proceeding if:
(1) The individual conducted himself or herself in good faith; and
(2) The individual reasonably believed:
(i) In the case of conduct in his or her official capacity with the corporation, that the conduct was in its best interests; and
(ii) In all other cases, that the conduct was at least not opposed to its best interests; and
(3) In the case of any criminal proceeding, the individual had no reasonable cause to believe his or her conduct was unlawful.
(b) A director’s conduct with respect to an employee benefit plan for a purpose he or she reasonably believed to be in the interests of the participants in and beneficiaries of the plan is conduct that satisfies the requirement of subsection (a)(2)(ii).
(c) The termination of a proceeding by judgement, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent is not, of itself, determinative that the director did not meet the standard of conduct described in this section.
(d) A corporation may not indemnify a director under this section:
(1) In connection with a proceeding by or in the right of the corporation in which the director was adjudged liable to the corporation; or
(2) In connection with any other proceeding charging improper personal benefit to the director, whether or not involving action in his or her official capacity, in which the director was adjudged liable on the basis that personal benefit was improperly received by him or her.
(e) Indemnification permitted under this section in connection with a proceeding by or in the right of the corporation is limited to reasonable expenses incurred in connection with the proceeding.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.51; amended and renumbered by Act 2009-513, p. 967, §124.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
A corporation shall indemnify a director who was successful, on the merits or otherwise, in the defense of any proceeding, or of any claim, issue or matter in the proceeding, where he or she was a party because he or she is or was a director of the corporation, against reasonable expenses incurred in connection therewith, notwithstanding that he or she was not successful on any other claim, issue or matter in any proceeding.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.52; amended and renumbered by Act 2009-513, p. 967, §124.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation may pay for or reimburse the reasonable expenses incurred by a director who is a party to a proceeding in advance of final disposition of the proceeding if:
(1) The director furnishes the corporation a written affirmation of good faith belief that he or she has met the standard of conduct described in Section 10A-2-8.51;
(2) The director furnishes the corporation a written undertaking, executed personally or on the director’s behalf, to repay the advance if it is ultimately determined that the director did not meet the standard of conduct, or is not otherwise entitled to indemnification under Section 10A-2-8.51(d), unless indemnification is approved by the court under Section 10A-2-8.54;
(3) A determination is made that the facts then known to those making the determination would not preclude indemnification under this division.
(b) The undertaking required by subsection (a)(2) must be an unlimited general obligation of the director but need not be secured and may be accepted without reference to financial ability to make repayment.
(c) Determinations and authorizations of payments under this section shall be made in the manner specified in Section 10A-2-8.55.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.53; amended and renumbered by Act 2009-513, p. 967, §124.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
A director of the corporation who is a party to a proceeding may apply for indemnification to the court conducting the proceeding, or may file an action therefor in another court of competent jurisdiction if the court has jurisdiction over the corporation and the corporation is a party to the proceeding. On receipt of the application or the filing of the action, the court after giving any notice it considers necessary may order indemnification if it determines:
(1) The director is entitled to mandatory indemnification under Section 10A-2-8.52, in which case the court shall also order the corporation to pay the director’s reasonable expenses incurred to obtain court-ordered indemnification; or
(2) The director is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not he or she met the standard of conduct set forth in Section 10A-2-8.51 or was adjudged liable as described in Section 10A-2-8.51(d), but if he or she was adjudged so liable the indemnification is limited to reasonable expenses incurred.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.54; amended and renumbered by Act 2009-513, p. 967, §124.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation may not indemnify a director under Section 10A-2-8.51 unless authorized in the specific case after a determination has been made that indemnification of the director is permissible in the circumstances because the director has met the standard of conduct set forth in Section 10A-2-8.51.
(b) The determination shall be made:
(1) By the board of directors by majority vote of a quorum consisting of directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under subdivision (1), by majority vote of a committee duly designated by the board of directors, in which designation directors who are parties may participate, consisting solely of two or more directors not at the time parties to the proceeding;
(3) By special legal counsel;
(i) Selected by the board of directors or its committee in the manner prescribed in subdivision (1) or (2); or
(ii) If a quorum of the board of directors cannot be obtained under subdivision (1) and a committee cannot be designated under subdivision (2), selected by majority vote of the full board of directors, in which selection directors who are parties may participate; or
(4) By the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the proceeding may not be voted on the determination. A majority of the shares that are entitled to vote on the transaction by virtue of not being owned by or under the control of the directors constitutes a quorum for the purpose of taking action under this section.
(c) Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification and evaluation as to reasonableness of expenses shall be made by those entitled under subsection (b)(3) to select counsel.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.55; amended and renumbered by Act 2009-513, p. 967, §124.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) An officer of a corporation who is not a director is entitled to mandatory indemnification under Section 10A-2-8.52, and is entitled to apply for court-ordered indemnification under Section 10A-2-8.54, in each case to the same extent as a director.
(b) A corporation may indemnify and may advance expenses under this division to an officer, employee, or agent of the corporation who is not a director to the same extent as to a director.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.56; amended and renumbered by Act 2009-513, p. 967, §124.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
A corporation may purchase and maintain insurance, or furnish similar protection, including but not limited to trust funds, self-insurance reserves, or the like, on behalf of an individual who is or was a director, officer, employee, or agent of the corporation, or who, while a director, officer, employee, or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture trust, employee benefit plan, or other enterprise, against liability asserted against or incurred by him or her in that capacity or arising from his or her status as a director, officer, employee, or agent, whether or not the corporation would have power to indemnify him or her against the same liability under Section 10A-2-8.51 or 10A-2-8.52.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.57; amended and renumbered by Act 2009-513, p. 967, §124.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Any indemnification, or advance for expenses, authorized under this division shall not be deemed exclusive of and shall be in addition to that which may be contained in a corporation’s articles of incorporation, bylaws, a resolution of its shareholders or board of directors, or in a contract or otherwise.
(b) This division does not limit a corporation’s power to pay or reimburse expenses incurred by a director in connection with the director’s appearance as a witness in a proceeding at a time when he or she has not been made a named defendant or respondent to the proceeding.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.58; amended and renumbered by Act 2009-513, p. 967, §124.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
In this division:
(1) “Conflicting interest” with respect to a corporation means the interest a director of the corporation has respecting a transaction effected or proposed to be effected by the corporation, or by a subsidiary of the corporation or any other entity in which the corporation has a controlling interest, if:
(i) Whether or not the transaction is brought before the board of directors of the corporation for action, the director knows at the time of commitment that he or she or a related person is a party to the transaction or has a beneficial interest in or so closely linked to the transaction and of the financial significance to the director or a related person that the interest would reasonably be expected to exert an influence on the director’s judgement if the director were called upon to vote on the transaction; or
(ii) The transaction is brought, or is of the character and significance to the corporation that it would in the normal course be brought, before the board of directors of the corporation for action, and the director knows at the time of commitment that any of the following persons is either a party to the transaction or has a beneficial financial interest in or so closely linked to the transaction and of such financial significance to the person that the interest would reasonably be expected to exert an influence on the director’s judgment if the director were called upon to vote on the transaction: (A) an entity, other than the corporation, of which the director is a director, general partner, agent, or employee; (B) a person that controls one or more of the entities specified in subclause (A) or an entity that is controlled by, or is under common control with, one or more of the entities specified in subclause (A); or (C) an individual who is a general partner, principal, or employer of the director.
(2) “Director’s conflicting interest transaction” with respect to a corporation means a transaction effected or proposed to be effected by the corporation, or by a subsidiary of the corporation or any other entity in which the corporation has a controlling interest, respecting which a director of the corporation has a conflicting interest.
(3) “Related person” of a director means (i) the spouse, or a parent or sibling thereof, of the director, or a child, grandchild, sibling, parent, or spouse of any thereof, of the director, or an individual having the same home as the director, or a trust or estate of which an individual specified in this clause (i) is a substantial beneficiary; or (ii) a trust, estate, incompetent, conservatee, or minor of which the director is a fiduciary.
(4) “Required disclosure” means disclosure by the director who has a conflicting interest of (i) the existence and nature of his or her conflicting interest, and (ii) all facts known to him or her respecting the subject matter of the transaction that an ordinarily prudent person would reasonably believe to be material to a judgment about whether or not to proceed with the transaction.
(5) “Time of commitment” respecting a transaction means the time when the transaction is consummated or, if made pursuant to contract, the time when the corporation, or its subsidiary or the entity in which it has a controlling interest, becomes contractually obligated so that its unilateral withdrawal from the transaction would entail significant loss, liability, or other damage.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.60; amended and renumbered by Act 2009-513, p. 967, §126.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A transaction effected or proposed to be effected by a corporation, or by a subsidiary of the corporation or any other entity in which the corporation has a controlling interest, that is not a director’s conflicting interest transaction may not be enjoined, set aside, or give rise to an award of damages or other sanctions, in a proceeding by a shareholder or by or in the right of the corporation, because a director of the corporation, or any person with whom or which he or she has a personal, economic, or other association, has an interest in the transaction.
(b) A director’s conflicting interest transaction may not be enjoined, set aside, or give rise to an award of damages or other sanctions, in a proceeding by a shareholder or by or in the right of the corporation, because the director, or any person with whom or which he or she has a personal, economic, or other association, has an interest in the transaction, if:
(1) Director’s action respecting the transaction was at any time taken in compliance with Section 10A-2-8.62; or
(2) Shareholders’ action respecting the transaction was at any time taken in compliance with Section 10A-2-8.63; or
(3) The transaction, judged according to the circumstances at the time of commitment, is established to have been fair to the corporation.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.61; amended and renumbered by Act 2009-513, p. 967, §126.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Directors’ action respecting a transaction is effective for purposes of Section 10A-2-8.61(b)(1) if the transaction received the affirmative vote of a majority, but no fewer than two, of those qualified directors on the board of directors or on a duly empowered committee of the board who voted on the transaction after either required disclosure to them, to the extent the information was not known by them, or compliance with subsection (b); provided that action by a committee is to be effective only if (1) all its members are qualified directors, and (2) its members are either all the qualified directors on the board or are appointed by the affirmative vote of a majority of the qualified directors on the board.
(b) If a director has a conflicting interest respecting a transaction but neither the director nor a related person of the director specified in Section 10A-2-8.60(3)(i) is a party to the transaction such that the director may not make the disclosure described in Section 10A-2-8.60(4)(ii), then disclosure is sufficient for purposes of subsection (a) if the director (1) discloses to the directors voting on the transaction the existence and nature of his or her conflicting interest and informs them of the character and limitations imposed by that duty before their vote on the transaction and (2) plays no part, directly or indirectly, in their deliberations or vote.
(c) A majority, but no fewer than two, of all the qualified directors on the board of directors, or on the committee, constitutes a quorum for purposes of action that complies with this section. Directors’ action that otherwise complies with this section is not affected by the presence or vote of a director who is not a qualified director.
(d) For purposes of this section, “qualified director” means, with respect to a director’s conflicting interest transaction, any director who does not have either (1) a conflicting interest respecting the transaction or (2) a familial, financial, professional, or employment relationship with a second director who does have a conflicting interest respecting the transaction, which relationship would, in the circumstances, reasonably be expected to exert an influence on the first director’s judgement when voting on the transaction.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.62; amended and renumbered by Act 2009-513, p. 967, §126.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Shareholders’ action respecting a transaction is effective for purposes of Section 10A-2-8.61(b)(2) if a majority of the votes entitled to be cast by the holders of all qualified shares were cast in favor of the transaction after (1) notice to shareholders describing the director’s conflicting interest transactions, (2) provision of the information referred to in subsection (d), and (3) required disclosure to the shareholders who voted on the transaction, to the extent the information was not known by them.
(b) For purposes of this section, “qualified shares” means any shares entitled to vote with respect to the director’s conflicting interest transaction except shares that, to the knowledge, before the vote, of the secretary, or other officer or agent of the corporation authorized to tabulate votes, are beneficially owned, or the voting of which is controlled, by a director who has a conflicting interest respecting the transaction or by a related person of the director, or both.
(c) A majority of the votes entitled to be cast by the holders of all qualified shares constitutes a quorum for purposes of action that complies with this section. Subject to the provisions of subsections (d) and (e), shareholders’ action that otherwise complies with this section is not affected by the presence of holders, or the voting, of shares that are not qualified shares.
(d) For purposes of compliance with subsection (a), a director who has a conflicting interest respecting the transaction shall, before the shareholders’ vote, inform the secretary, or other officer or agent of the corporation authorized to tabulate votes, of the number, and the identity of persons holding or controlling the vote, of all shares that the director knows are beneficially owned, or the voting of which is controlled, by the director or by a related person of the director, or both.
(e) If a shareholder’s vote does not comply with subsection (a) solely because of the failure of a director to comply with subsection (a), and if the director establishes that his or her failure did not determine and was not intended by him or her to influence the outcome of the vote, the court may, with or without further proceedings respecting Section 10A-2-8.61(b)(3), take action respecting the transaction and the director, and give the effect, if any, to the shareholder’s vote, as it considers appropriate in the circumstances.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-8.63; amended and renumbered by Act 2009-513, p. 967, §126.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation may amend its articles of incorporation at any time to add or change a provision that is required or permitted in the articles of incorporation or to delete a provision not required in the articles of incorporation. Whether a provision is required or permitted in the articles of incorporation is determined as of the effective date of the amendment.
(b) A shareholder of the corporation does not have a vested property right resulting from any provision in the articles of incorporation, including provisions relating to management, control, capital structure, dividend entitlement, or purpose or duration of the corporation.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-10.01; amended and renumbered by Act 2009-513, p. 967, §129.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Unless the articles of incorporation provide otherwise, a corporation’s board of directors may adopt one or more amendments to the corporation’s articles of incorporation without shareholder action:
(1) To extend the duration of the corporation if it was incorporated at a time when limited duration was required by law;
(2) To delete the names and addresses of the initial directors;
(3) To delete the name and address of the initial registered agent or registered office, if a statement of change is on file with the Secretary of State;
(4) To change each issued and unissued authorized share of an outstanding class into a greater number of whole shares if the corporation has only shares of that class outstanding;
(5) To change the corporate name by substituting the word “corporation,” or “incorporated,” or an abbreviation of one of the words for a similar word or abbreviation in the name, or by adding, deleting, or changing a geographical attribution for the name; or
(6) To make any other change expressly permitted by this chapter to be made without shareholder action.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-10.02; amended and renumbered by Act 2009-513, p. 967, §129.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation’s board of directors may propose one or more amendments to the articles of incorporation for submission to the shareholders.
(b) For the amendments to be adopted:
(1) The board of directors must recommend the amendment to the shareholders unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the amendment; and
(2) The shareholders entitled to vote on the amendment must approve the amendment as provided in subsection (e).
(c) Subject to the corporation’s articles of incorporation, the board of directors may condition its submission of the proposed amendment on any basis, except that the board of directors may not decrease the vote required for approval under subsection (e).
(d) The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders’ meeting in accordance with Section 10A-2-7.05. The notice of meeting must also state that the purpose, or one of the purposes, of the meeting is to consider the proposed amendment and contain or be accompanied by a copy or summary of the amendment.
(e) Unless this chapter, the articles of incorporation, or the board of directors, acting pursuant to subsection (c), require a greater vote or a vote by voting groups, the amendment to be adopted must be approved by:
(1) A majority of the votes entitled to be cast on the amendment by any voting group with respect to which the amendment would create dissenters’ rights; and
(2) The votes required by Sections 10A-2-7.25 and 10A-2-7.26 by every other voting group entitled to vote on the amendment.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-10.03; amended and renumbered by Act 2009-513, p. 967, §129.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The holders of the outstanding shares of a class are entitled to vote as a separate voting group, if shareholder voting is otherwise required by this chapter, on a proposed amendment if the amendment would:
(1) Increase or decrease the aggregate number of authorized shares of the class;
(2) Effect an exchange or reclassification of all or part of the shares of the class into shares of another class;
(3) Effect an exchange or reclassification, or create the right of exchange, of all or part of the shares of another class into shares of the class;
(4) Change the designation, rights, preferences, or limitations of all or part of the shares of the class;
(5) Change the shares of all or part of the class into a different number of shares of the same class;
(6) Create a new class of shares having rights or preferences with respect to distributions or to dissolutions that are prior, superior, or substantially equal to the shares of the class;
(7) Increase the rights, preferences, or number of authorized shares of any class that, after giving effect to the amendment, have rights or preferences with respect to distributions or to dissolutions that are prior, superior, or substantially equal to the shares of the class;
(8) Limit or deny an existing preemptive right of all or part of the shares of the class; or
(9) Cancel or otherwise affect rights to distributions of dividends that have accumulated but not yet been declared on all or part of the shares of the class.
(b) If a proposed amendment would affect a series of a class of shares in one or more ways described in subsection (a), the shares of that series are entitled to vote as a separate voting group on the proposed amendment.
(c) If a proposed amendment that entitles two or more series of shares to vote as separate voting groups under this section would affect those two or more series in the same or substantially similar way, the shares of all the series so affected must vote together as a single voting group on the proposed amendment.
(d) A class or series of shares is entitled to the voting rights granted by this section although the articles of incorporation provide that the shares are nonvoting shares.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-10.04; amended and renumbered by Act 2009-513, p. 967, §129.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
If a corporation has not yet issued shares, its board of directors may adopt one or more amendments to the corporation’s articles of incorporation.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-10.05; amended and renumbered by Act 2009-513, p. 967, §129.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
A corporation amending its articles of incorporation shall deliver to the judge of probate for filing articles of amendment setting forth:
(1) The name of the corporation;
(2) The text of each amendment adopted;
(3) If an amendment provides for an exchange, reclassification, or cancellation of issued shares, provisions for implementing the amendment if not contained in the amendment itself;
(4) The date of each amendment’s adoption;
(5) If an amendment was adopted by the board of directors without shareholder action, a statement to that effect and that shareholder action was not required;
(6) If an amendment was approved by the shareholders:
(i) The designation, number of outstanding shares, number of votes entitled to be cast by each voting group entitled to vote separately on the amendment, and the number of votes of each voting group indisputably represented at the meeting; and
(ii) Either the total number of votes cast for and against the amendment by each voting group entitled to vote separately on the amendment or the total number of undisputed votes cast for the amendment by each voting group and a statement that the number cast for the amendment by each voting group was sufficient for approval by that voting group.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-10.06; amended and renumbered by Act 2009-513, p. 967, §129.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation’s board of directors may restate its articles of incorporation at any time with or without shareholder action.
(b) The restatement may include one or more amendments to the articles. If the restatement includes an amendment requiring shareholder approval, it must be adopted as provided in Section 10A-2-10.03.
(c) If the board of directors submits a restatement for shareholder action, the corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders’ meeting in accordance with Section 10A-2-7.05. The notice must also state that the purpose, or one of the purposes, of the meeting is to consider the proposed restatement that identifies any amendment or other change it would make in the articles.
(d) A corporation restating its articles of incorporation shall deliver to the judge of probate for filing articles of restatement setting forth the name of the corporation and the text of the restated articles of incorporation together with a certificate setting forth:
(1) Whether the restatement contains an amendment to the articles requiring shareholder approval and, if it does not, that the board of directors adopted the restatement;
(2) If the restatement contains an amendment to the articles requiring shareholder approval, the information required by Section 10A-2-10.06.
(e) Duly adopted restated articles of incorporation supersede the original articles of incorporation and all amendments to them.
(f) The judge of probate may certify restated articles of incorporation, as the articles of incorporation currently in effect, without including the certificate information required by subsection (d).
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-10.07; amended and renumbered by Act 2009-513, p. 967, §129.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation’s articles of incorporation may be amended without action by the board of directors or shareholders to carry out a plan of reorganization ordered or decreed by a court of competent jurisdiction under federal statute if the articles of incorporation after amendment contain only provisions required or permitted by Section 10A-2-2.02.
(b) The individual or individuals designated by the court shall deliver to the judge of probate for filing articles of amendment setting forth:
(1) The name of the corporation;
(2) The text of each amendment approved by the court;
(3) The date of the court’s order or decree approving the articles of amendment;
(4) The title of the reorganization proceeding in which the order or decree was entered; and
(5) A statement that the court had jurisdiction of the proceeding under federal statute.
(c) Shareholders of a corporation undergoing reorganization do not have dissenters’ rights except as and to the extent provided in the reorganization plan.
(d) This section does not apply after entry of a final decree in the reorganization proceeding even though the court retains jurisdiction of the proceeding for limited purposes unrelated to consummation of the reorganization plan.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-10.08; amended and renumbered by Act 2009-513, p. 967, §129.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
An amendment to articles of incorporation does not affect a cause of action existing against or in favor of the corporation, a proceeding to which the corporation is a party, or the existing rights of persons other than shareholders of the corporation. An amendment changing a corporation’s name does not abate a proceeding brought by or against the corporation in its former name.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-10.09; amended and renumbered by Act 2009-513, p. 967, §129.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation’s board of directors may amend or repeal the corporation’s bylaws unless:
(1) The articles of incorporation or this chapter reserve this power exclusively to the shareholders in whole or part; or
(2) The shareholders in amending or repealing a particular bylaw provide expressly that the board of directors may not amend or repeal that bylaw.
(b) A corporation’s shareholders may amend or repeal the corporation’s bylaws even though the bylaws may also be amended or repealed by its board of directors.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-10.20; amended and renumbered by Act 2009-513, p. 967, §131.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If authorized by the articles of incorporation, the shareholders may adopt or amend a bylaw that fixes a greater quorum or voting requirement for shareholders, or voting groups of shareholders, than is required by this chapter. The adoption or amendment of a bylaw that adds, changes, or deletes a greater quorum or voting requirement for shareholders must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater.
(b) A bylaw that fixes a greater quorum or voting requirement for shareholders under subsection (a) may not be adopted, amended, or repealed by the board of directors.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-10.21; amended and renumbered by Act 2009-513, p. 967, §131.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A bylaw that fixes a greater quorum or voting requirement for the board of directors may be amended or repealed:
(1) If originally adopted by the shareholders, only by the shareholders;
(2) If originally adopted by the board of directors, either by the shareholders or by the board of directors.
(b) A bylaw adopted or amended by the shareholders that fixes a greater quorum or voting requirement for the board of directors may provide that it may be amended or repealed only by a specified vote of either the shareholders or the board of directors.
(c) Action by the board of directors under subsection (a)(2) to adopt or amend a bylaw that changes the quorum or voting requirement for the board of directors must meet the same quorum requirement and be adopted by the same vote required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-10.22; amended and renumbered by Act 2009-513, p. 967, §131.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Subject to the limitations of the Constitution of Alabama of 1901 as the same may be amended from time to time, one or more corporations may merge into another corporation if the board of directors of each corporation adopts and its shareholders, if required by Section 10A-2-11.03, approve a plan of merger.
(b) The plan of merger must set forth:
(1) The name of each corporation planning to merge and the name of the surviving corporation into which each other corporation plans to merge;
(2) The terms and conditions of the merger; and
(3) The manner and basis of converting the shares of each corporation into shares, obligations, or other securities of any other corporation or into cash or other property in whole or part.
(c) The plan of merger may set forth:
(1) Amendments to the articles of incorporation of the surviving corporation; and
(2) Other provisions relating to the merger.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-11.01; amended and renumbered by Act 2009-513, p. 967, §133.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Subject to the limitations of the Constitution of Alabama of 1901, as it may be amended from time to time, a corporation may acquire all of the outstanding shares of one or more classes or series of another corporation if the board of directors of each corporation adopts and, if required by Section 10A-2-11.03, the shareholders of each corporation approve the exchange.
(b) The plan of exchange shall set forth all of the following:
(1) The name of the corporation whose shares will be acquired and the name of the acquiring corporation.
(2) The terms and conditions of the exchange.
(3) The manner and basis of exchanging the shares to be acquired for shares, obligations, or other securities of the acquiring or any other corporation or for cash or other property in whole or part.
(c) The plan of exchange may set forth other provisions relating to the exchange.
(d) This section does not limit the power of a corporation to acquire all or part of the shares of one or more classes or series of another corporation through a voluntary exchange or otherwise.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-11.02; amended and renumbered by Act 2009-513, p. 967, §133; Act 2012-563, p. 1675, §1.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) After adopting a plan of merger or share exchange, the board of directors of each corporation party to the merger, and the board of directors of the corporation whose shares will be acquired in the share exchange, shall submit the plan of merger, except as provided in subsection (g), or share exchange for approval by its shareholders.
(b) For a plan of merger or share exchange to be approved:
(1) The board of directors must recommend the plan of merger or share exchange to the shareholders, unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the plan; and
(2) The shareholders entitled to vote must approve the plan.
(c) Subject to the corporation’s articles of incorporation, the board of directors may condition its submission of the proposed merger or share exchange on any basis, except that the board of directors may not decrease the vote required for approval under subsection (e).
(d) The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders’ meeting in accordance with Section 10A-2-7.05. The notice must also state that the purpose, or one of the purposes, of the meeting is to consider the plan of merger or share exchange and contain or be accompanied by a copy or summary of the plan.
(e) Unless this chapter or the articles of incorporation require a greater or lesser vote or a vote by voting groups, or the board of directors, acting pursuant to subsection (c), requires a greater vote or a vote by voting groups, the plan of merger or share exchange to be authorized must be approved by each voting group entitled to vote separately on the plan by two thirds of all the votes entitled to be cast on the plan by that voting group; but in no case may the vote required for shareholder approval be set at less than a majority of the votes entitled to be cast on the plan by each voting group.
(f) Separate voting by voting groups is required:
(1) On a plan of merger if the plan contains a provision that, if contained in a proposed amendment to articles of incorporation, would require action by one or more separate voting groups on the proposed amendment under Section 10A-2-10.04;
(2) On a plan of share exchange by each class or series of shares included in the exchange, with each class or series constituting a separate voting group.
(g) Action by the shareholders of the surviving corporation on a plan of merger is not required if:
(1) The articles of incorporation of the surviving corporation will not differ, except for amendments enumerated in Section 10A-2-10.02, from its articles before the merger;
(2) Each shareholder of the surviving corporation whose shares were outstanding immediately before the effective date of the merger will hold the same number of shares, with identical designations, preferences, limitations, and relative rights, immediately after;
(3) The number of voting shares outstanding immediately after the merger, plus the number of voting shares issuable as a result of the merger, either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will not exceed by more than 20 percent the total number of voting shares of the surviving corporation outstanding immediately before the merger; and
(4) The number of participating shares outstanding immediately after the merger, plus the number of participating shares issuable as a result of the merger, either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will not exceed by more than 20 percent the total number of participating shares outstanding immediately before the merger.
(h) As used in subsection (g):
(1) “Participating shares” means shares that entitle their holders to participate without limitation in distributions.
(2) “Voting shares” means shares that entitle their holders to vote unconditionally in elections of directors.
(i) After a merger or share exchange is authorized, and at any time before articles of merger or share exchange are filed, the planned merger or share exchange may be abandoned, subject to any contractual rights, without further shareholder action, in accordance with the procedure set forth in the plan of merger or share exchange or, if none is set forth, in the manner determined by the board of directors.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-11.03; amended and renumbered by Act 2009-513, p. 967, §133.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Subject to the limitations of the Constitution of Alabama of 1901, as the same may be amended from time to time, a parent corporation owning at least 80 percent of the outstanding shares of each class of a subsidiary corporation may merge the subsidiary into itself without approval of the shareholders of the parent or subsidiary.
(b) The board of directors of the parent shall adopt a plan of merger that sets forth:
(1) The names of the parent and subsidiary; and
(2) The manner and basis of converting the shares of the subsidiary into shares, obligations, or other securities of the parent or any other corporation or into cash or other property in whole or part.
(c) The parent shall mail a copy or summary of the plan of merger to each shareholder of the subsidiary who does not waive the mailing requirement in writing.
(d) The parent may not deliver articles of merger to the Secretary of State for filing until at least 30 days after the date it mailed a copy of the plan of merger to each shareholder of the subsidiary who did not waive the mailing requirement.
(e) Articles of merger under this section may not contain amendments to the articles of incorporation of the parent corporation, except for amendments enumerated in Section 10A-2-10.02.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-11.04; amended and renumbered by Act 2009-513, p. 967, §133.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) After a plan of merger or share exchange is approved by the shareholders, or adopted by the board of directors if shareholder approval is not required, the surviving or acquiring corporation shall deliver to the Secretary of State for filing articles of merger or share exchange setting forth:
(1) The plan of merger or share exchange;
(2) If shareholder approval was not required, a statement to that effect;
(3) If approval of the shareholders of one or more corporations party to the merger or share exchange was required:
(i) The designation, number of outstanding shares, and number of votes entitled to be cast by each voting group entitled to vote separately on the plan as to each corporation; and
(ii) Either the total number of votes cast for and against the plan by each voting group entitled to vote separately on the plan or the total number of undisputed votes cast for the plan separately by each voting group and a statement that the number cast for the plan by each voting group was sufficient for approval by that voting group; and
(4) As to each domestic corporation, the county in which its articles of incorporation are filed.
(b) A merger or share exchange takes effect upon the effective date of the articles of merger or share exchange.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-11.05; amended and renumbered by Act 2009-513, p. 967, §133.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) When a merger takes effect:
(1) Every other corporation party to the merger merges into the surviving corporation and the separate existence of every corporation except the surviving corporation ceases;
(2) The surviving corporation thereupon and thereafter possesses all the rights, immunities, and franchises, of a public as well as of a private nature, of every corporation party to the merger; and all property, real, personal and mixed, and all debts due each of the corporations so merged, are taken and deemed to be transferred and vested in the surviving corporation without further act or deed; and title to any real estate, or an interest therein, vested in any of the corporations shall not revert nor in any way be impaired by reason of the merger;
(3) The surviving corporation shall be responsible and liable for all the liabilities and obligations of each corporation party to the merger; and neither the rights of creditors nor any liens upon the property of any corporation party to the merger shall be impaired by the merger;
(4) Any claim existing or action or proceeding pending by or against any corporation party to the merger may be prosecuted, or continued, as if the merger had not taken place, or the surviving corporation may be substituted in the action or proceeding for the corporation whose existence ceased;
(5) The articles of incorporation of the surviving corporation are amended to the extent provided in the plan of merger; and
(6) The shares of each corporation party to the merger that are to be converted into shares, obligations, or other securities of the surviving or any other corporation or into cash or other property are converted and the former holders of the shares are entitled only to the rights provided in the articles of merger or to their rights under Article 13.
(b) When a share exchange takes effect, the shares of each acquired corporation are exchanged as provided in the plan, and the former holders of the shares are entitled only to the exchange rights provided in the articles of share exchange or to their rights under Article 13.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-11.06; amended and renumbered by Act 2009-513, p. 967, §133.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Subject to the limitations of the Constitution of Alabama of 1901, as the same may be amended from time to time, one or more foreign corporations may merge or enter into a share exchange with one or more domestic corporations if:
(1) In a merger, the merger is permitted by the law of the state or country under whose law each foreign corporation is incorporated and each foreign corporation complies with that law in effecting the merger;
(2) In a share exchange, the corporation whose shares will be acquired is a domestic corporation, whether or not a share exchange is permitted by the law of the state or country under whose law the acquiring corporation is incorporated;
(3) The foreign corporation complies with Section 10A-2-11.05 if it is the surviving corporation of the merger or acquiring corporation of the share exchange; and
(4) Each domestic corporation complies with the applicable provisions of Sections 10A-2-11.01 through 10A-2-11.04 and, if it is the surviving corporation of the merger or acquiring corporation of the share exchange, with Section 10A-2-11.05.
(b) Upon the merger or share exchange taking effect, the surviving foreign corporation of a merger and the acquiring foreign corporation of a share exchange is deemed:
(1) To appoint the Secretary of State as its agent for service of process in a proceeding to enforce any obligation or the rights of dissenting shareholders of each domestic corporation party to the merger or share exchange; and
(2) To agree that it will promptly pay to the dissenting shareholders of each domestic corporation party to the merger or share exchange the amount, if any, to which they are entitled under Article 13.
(c) This section does not limit the power of a foreign corporation to acquire all or part of the shares of one or more classes or series of a domestic corporation through a voluntary exchange or otherwise.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-11.07; amended and renumbered by Act 2009-513, p. 967, §133.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
This article is not exclusive. Corporations may merge or exchange their shares in any other manner provided by law.
(Act 2009-513, p. 967, §135.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Subject to the limitations of the Constitution of Alabama of 1901, as the same may be amended from time to time, a corporation may, on the terms and conditions and for the consideration determined by the board of directors:
(1) Sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property in the usual and regular course of business;
(2) Mortgage, pledge, dedicate to the repayment of indebtedness, whether with or without recourse, or otherwise encumber any or all of its property whether or not in the usual and regular course of business; or
(3) Transfer any or all of its property to a corporation all the shares of which are owned by the corporation.
(b) Unless the articles of incorporation require it, approval by the shareholders of a transaction described in subsection (a) is not required.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-12.01; amended and renumbered by Act 2009-513, p. 967, §137.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Subject to the limitations of the Constitution of Alabama of 1901, as the same may be amended from time to time, a corporation may sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property, with or without the good will, otherwise than in the usual and regular course of business on the terms and conditions and for the consideration determined by the corporation’s board of directors, if the board of directors proposes and its shareholders approve the proposed transaction.
(b) For a transaction to be authorized:
(1) The board of directors must recommend the proposed transaction to the shareholders unless the board of directors determines that because of a conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the submission of the proposed transaction; and
(2) The shareholders entitled to vote must approve the transaction.
(c) Subject to the corporation’s articles of incorporation, the board of directors may condition its submission of the proposed transaction on any basis, except that the board of directors may not decrease the vote required for approval under subsection (e).
(d) The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders’ meeting in accordance with Section 10A-2-7.05. The notice must also state that the purpose, or one of the purposes, of the meeting is to consider the sale, lease, exchange, or other disposition of all, or substantially all, the property of the corporation and contain or be accompanied by a description of the transaction.
(e) Unless the articles of incorporation require a greater or lesser vote or a vote by voting groups, or the board of directors, acting pursuant to subsection (c), requires a greater vote or a vote by voting groups, the transaction to be authorized must be approved by each voting group entitled to vote separately on the transaction by two thirds of all the votes entitled to be cast on the transaction by that voting group; but in no case may the vote required for shareholder approval be set at less than a majority of all the votes entitled to be cast on the transaction by each voting group.
(f) After a sale, lease, exchange, or other disposition of property is authorized, the transaction may be abandoned, subject to any contractual rights, without further shareholder action.
(g) A transaction that constitutes a distribution is governed by Section 10A-2-6.40 and not by this section.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-12.02; amended and renumbered by Act 2009-513, p. 967, §137.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(1) “Corporate action” means the filing of articles of merger or share exchange by the judge of probate or Secretary of State, or other action giving legal effect to a transaction that is the subject of dissenters’ rights.
(2) “Corporation” means the issuer of shares held by a dissenter before the corporate action, or the surviving or acquiring corporation by merger or share exchange of that issuer.
(3) “Dissenter” means a shareholder who is entitled to dissent from corporate action under Section 10A-2-13.02 and who exercises that right when and in the manner required by Sections 10A-2-13.20 through 10A-2-13.28.
(4) “Fair Value,” with respect to a dissenter’s shares, means the value of the shares immediately before the effectuation of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable.
(5) “Interest” means interest from the effective date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans, or, if none, at a rate that is fair and equitable under all circumstances.
(6) “Record shareholder” means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation.
(7) “Beneficial shareholder” means the person who is a beneficial owner of shares held in a voting trust or by a nominee as the record shareholder.
(8) “Shareholder” means the record shareholder or the beneficial shareholder.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.01; amended and renumbered by Act 2009-513, p. 967, §139.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A shareholder is entitled to dissent from, and obtain payment of the fair value of his or her shares in the event of, any of the following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party (i) if shareholder approval is required for the merger by Section 10A-2-11.03 or the articles of incorporation and the shareholder is entitled to vote on the merger or (ii) if the corporation is a subsidiary that is merged with its parent under Section 10A-2-11.04;
(2) Consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange by all, or substantially all, of the property of the corporation other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within one year after the date of sale;
(4) To the extent that the articles of incorporation of the corporation so provide, an amendment of the articles of incorporation that materially and adversely affects rights in respect to a dissenter’s shares because it:
(i) Alters or abolishes a preferential right of the shares;
(ii) Creates, alters, or abolishes a right in respect of redemption, including a provision respecting a sinking fund for the redemption or repurchase of the shares;
(iii) Alters or abolishes a preemptive right of the holder of the shares to acquire shares or other securities;
(iv) Excludes or limits the right of the shares to vote on any matter, or to cumulate votes, other than a limitation by dilution through issuance of shares or other securities with similar voting rights; or
(v) Reduces the number of shares owned by the shareholder to a fraction of a share if the fractional share so created is to be acquired for cash under Section 10A-2-6.04; or
(5) Any corporate action taken pursuant to a shareholder vote to the extent the articles of incorporation, bylaws, or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares.
(b) A shareholder entitled to dissent and obtain payment for shares under this chapter may not challenge the corporate action creating his or her entitlement unless the action is unlawful or fraudulent with respect to the shareholder or the corporation.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.02; amended and renumbered by Act 2009-513, p. 967, §139.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A record shareholder may assert dissenters’ rights as to fewer than all of the shares registered in his or her name only if he or she dissents with respect to all shares beneficially owned by any one person and notifies the corporation in writing of the name and address of each person on whose behalf he or she asserts dissenters’ rights. The rights of a partial dissenter under this subsection are determined as if the shares to which he or she dissents and his or her other shares were registered in the names of different shareholders.
(b) A beneficial shareholder may assert dissenters’ rights as to shares held on his or her behalf only if:
(1) He or she submits to the corporation the record shareholder’s written consent to the dissent not later than the time the beneficial shareholder asserts dissenters’ rights; and
(2) He or she does so with respect to all shares of which he or she is the beneficial shareholder or over which he or she has power to direct the vote.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.03; amended and renumbered by Act 2009-513, p. 967, §139.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If proposed corporate action creating dissenters’ rights under Section 10A-2-13.02 is submitted to a vote at a shareholders’ meeting, the meeting notice must state that shareholders are or may be entitled to assert dissenters’ rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenters’ rights under Section 10A-2-13.02 is taken without a vote of shareholders, the corporation shall (1) notify in writing all shareholders entitled to assert dissenters’ rights that the action was taken; and (2) send them the dissenters’ notice described in Section 10A-2-13.22.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.20; amended and renumbered by Act 2009-513, p. 967, §141.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If proposed corporate action creating dissenters’ rights under Section 10A-2-13.02 is submitted to a vote at a shareholder’s meeting, a shareholder who wishes to assert dissenters’ rights (1) must deliver to the corporation before the vote is taken written notice of his or her intent to demand payment or his or her shares if the proposed action is effectuated; and (2) must not vote his or her shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of subsection (a) is not entitled to payment for his or her shares under this article.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.21; amended and renumbered by Act 2009-513, p. 967, §141.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If proposed corporate action creating dissenters’ rights under Section 10A-2-13.02 is authorized at a shareholders’ meeting, the corporation shall deliver a written dissenters’ notice to all shareholders who satisfied the requirements of Section 10A-2-13.21.
(b) The dissenters’ notice must be sent no later than 10 days after the corporate action was taken, and must:
(1) State where the payment demand must be sent;
(2) Inform holders of shares to what extent transfer of the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) Set a date by which the corporation must receive the payment demand, which date may not be fewer than 30 nor more than 60 days after the date the subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this article.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.22; amended and renumbered by Act 2009-513, p. 967, §141.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A shareholder sent a dissenters’ notice described in Section 10A-2-13.22 must demand payment in accordance with the terms of the dissenters’ notice.
(b) The shareholder who demands payment retains all other rights of a shareholder until those rights are canceled or modified by the taking of the proposed corporate action.
(c) A shareholder who does not demand payment by the date set in the dissenters’ notice is not entitled to payment for his or her shares under this article.
(d) A shareholder who demands payment under subsection (a) may not thereafter withdraw that demand and accept the terms offered under the proposed corporate action unless the corporation shall consent thereto.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.23; amended and renumbered by Act 2009-513, p. 967, §141.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Within 20 days after making a formal payment demand, each shareholder demanding payment shall submit the certificate or certificates representing his or her shares to the corporation for (1) notation thereon by the corporation that the demand has been made and (2) return to the shareholder by the corporation.
(b) The failure to submit his or her shares for notation shall, at the option of the corporation, terminate the shareholders’ rights under this article unless a court of competent jurisdiction, for good and sufficient cause, shall otherwise direct.
(c) If shares represented by a certificate on which notation has been made shall be transferred, each new certificate issued therefor shall bear similar notation, together with the name of the original dissenting holder of the shares.
(d) A transferee of the shares shall acquire by the transfer no rights in the corporation other than those which the original dissenting shareholder had after making demand for payment of the fair value thereof.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.24; amended and renumbered by Act 2009-513, p. 967, §141.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) As soon as the proposed corporate action is taken, or upon receipt of a payment demand, the corporation shall offer to pay each dissenter who complied with Section 10A-2-13.23 the amount the corporation estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation’s balance sheet as of the end of a fiscal year ending not more than 16 months before the date of the offer, an income statement for that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation’s estimate of the fair value of the shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter’s right to demand payment under Section 10A-2-13.28; and
(5) A copy of this article.
(c) Each dissenter who agrees to accept the corporation’s offer of payment in full satisfaction of his or her demand must surrender to the corporation the certificate or certificates representing his or her shares in accordance with terms of the dissenters’ notice. Upon receiving the certificate or certificates, the corporation shall pay each dissenter the fair value of his or her shares, plus accrued interest, as provided in subsection (a). Upon receiving payment, a dissenting shareholder ceases to have any interest in the shares.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.25; amended and renumbered by Act 2009-513, p. 967, §141.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If the corporation does not take the proposed action within 60 days after the date set for demanding payment, the corporation shall release the transfer restrictions imposed on shares.
(b) If, after releasing transfer restrictions, the corporation takes the proposed action, it must send a new dissenters’ notice under Section 10A-2-13.22 and repeat the payment demand procedure.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.26; amended and renumbered by Act 2009-513, p. 967, §141.)
Reserved.
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A dissenter may notify the corporation in writing of his or her own estimate of the fair value of his or her shares and amount of interest due, and demand payment of his or her estimate, or reject the corporation’s offer under Section 10A-2-13.25 and demand payment of the fair value of his or her shares and interest due, if:
(1) The dissenter believes that the amount offered under Section 10A-2-13.25 is less than the fair value of his or her shares or that the interest due is incorrectly calculated;
(2) The corporation fails to make an offer under Section 10A-2-13.25 within 60 days after the date set for demanding payment; or
(3) The corporation, having failed to take the proposed action, does not release the transfer restrictions imposed on shares within 60 days after the date set for demanding payment.
(b) A dissenter waives his or her right to demand payment under this section unless he or she notifies the corporation of his or her demand in writing under subsection (a) within 30 days after the corporation offered payment for his or her shares.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.28; amended and renumbered by Act 2009-513, p. 967, §141.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If a demand for payment under Section 10A-2-13.28 remains unsettled, the corporation shall commence a proceeding within 60 days after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the 60 day period, it shall pay each dissenter whose demand remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding in the circuit court of the county where the corporation’s principal office, or, if none in this state, its registered office, is located. If the corporation is a foreign corporation without a registered office in this state, it shall commence the proceeding in the county in this state where the registered office of the domestic corporation merged with or whose shares were acquired by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of this state, whose demands remain unsettled parties to the proceeding as in an action against their shares, and all parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided under the Alabama Rules of Civil Procedure.
(d) After service is completed, the corporation shall deposit with the clerk of the court an amount sufficient to pay unsettled claims of all dissenters party to the action in an amount per share equal to its prior estimate of fair value, plus accrued interest, under Section 10A-2-13.25.
(e) The jurisdiction of the court in which the proceeding is commenced under subsection (b) is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend decision on the question of fair value. The appraisers have the powers described in the order appointing them, or in any amendment to it. The dissenters are entitled to the same discovery rights as parties in other civil proceedings.
(f) Each dissenter made a party to the proceeding is entitled to judgment for the amount the court finds to be the fair value of his or her shares, plus accrued interest. If the court’s determination as to the fair value of a dissenter’s shares, plus accrued interest, is higher than the amount estimated by the corporation and deposited with the clerk of the court pursuant to subsection (d), the corporation shall pay the excess to the dissenting shareholder. If the court’s determination as to fair value, plus accrued interest, of a dissenter’s shares is less than the amount estimated by the corporation and deposited with the clerk of the court pursuant to subsection (d), then the clerk shall return the balance of funds deposited, less any costs under Section 10A-2-13.31, to the corporation.
(g) Upon payment of the judgment, and surrender to the corporation of the certificate or certificates representing the appraised shares, a dissenting shareholder ceases to have any interest in the shares.
(Acts 1994, No. 94-245, p. 343, §1; ; §10-2B-13.30; amended and renumbered by Act 2009-513, p. 967, §143.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) The court in an appraisal proceeding commenced under Section 10A-2-13.30 shall determine all costs of the proceeding, including compensation and expenses of appraisers appointed by the court. The court shall assess the costs against the corporation, except that the court may assess costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under Section 10A-2-13.28.
(b) The court may also assess the reasonable fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the court finds the corporation did not substantially comply with the requirements of Sections 10A-2-13.20 through 10A-2-13.28; or
(2) Against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this chapter.
(c) If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to these counsel reasonable fees to be paid out of the amounts awarded the dissenters who were benefitted.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.31; amended and renumbered by Act 2009-513, p. 967, §143.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Shares acquired by a corporation pursuant to payment of the agreed value therefor or to payment of the judgment entered therefor, as in this chapter provided, may be held and disposed of by the corporation as in the case of other treasury shares, except that, in the case of a merger or share exchange, they may be held and disposed of as the plan of merger or share exchange may otherwise provide.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-13.32; amended and renumbered by Act 2009-513, p. 967, §143.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
A majority of the incorporators or initial directors of a corporation that has not issued shares or has not commenced business may dissolve the corporation by delivering for filing to the judge of probate articles of dissolution that set forth:
(1) The name of the corporation;
(2) The date of its incorporation;
(3) Either (i) that none of the corporation’s shares has been issued or (ii) that the corporation has not commenced business;
(4) That no debt of the corporation remains unpaid;
(5) That the net assets of the corporation remaining after winding up have been distributed to the shareholders, if shares were issued; and
(6) That a majority of the incorporators or initial directors authorized the dissolution.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.01; amended and renumbered by Act 2009-513, p. 967, §145.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation’s board of directors may propose dissolution for submission to the shareholders.
(b) For a proposal to dissolve to be adopted:
(1) The board of directors must recommend dissolution to the shareholders unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders; and
(2) The shareholders entitled to vote must approve the proposal to dissolve as provided in subsection (e).
(c) Subject to the corporation’s articles of incorporation, the board of directors may condition its submission of the proposal for dissolution on any basis, except that the board of directors may not decrease the vote required for approval under subsection (e).
(d) The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders’ meeting in accordance with Section 10A-2-7.05. The notice must also state that the purpose, or one of the purposes, of the meeting is to consider dissolving the corporation.
(e) Unless the articles of incorporation require a greater or lesser vote or a vote by voting groups, or the board of directors, acting pursuant to subsection (c), requires a greater vote or a vote by voting groups, the proposal to dissolve to be adopted must be approved by each voting group entitled to vote separately on the proposal by two thirds of all the votes entitled to be cast on the proposal by that voting group; but in no case may the vote required for shareholder approval be set at less than a majority of all the votes entitled to be cast on the proposal by each voting group.
(f) In lieu of the procedure set forth in subsections (a) through (e) above, a corporation may be dissolved by the written consent of all of its shareholders, whether or not otherwise entitled to vote, without action by the corporation’s board of directors.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.02; amended and renumbered by Act 2009-513, p. 967, §145.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) At any time after dissolution is authorized, the corporation may dissolve by delivering to the judge of probate for filing articles of dissolution setting forth:
(1) The name of the corporation;
(2) The date dissolution was authorized;
(3) If dissolution was approved by the shareholders:
(i) The number of votes entitled to be cast on the proposal to dissolve; and
(ii) Either the total number of votes cast for and against dissolution or the total number of undisputed votes cast for dissolution and a statement that the number cast for dissolution was sufficient for approval.
(4) If voting by voting groups was required, the information required by subparagraph (3) must be separately provided for each voting group entitled to vote separately on the plan to dissolve.
(5) If dissolution was approved by written consent of all shareholders under Section 10A-2-14.02(f), a statement to that effect in lieu of the information required by subparagraphs (3) and (4), and a copy of the written consent or consents signed by all shareholders of the corporation.
(b) A corporation is dissolved upon the effective date of its articles of dissolution.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.03; amended and renumbered by Act 2009-513, p. 967, §145.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation may revoke its dissolution within 120 days of its effective date.
(b) Revocation of dissolution must be authorized in the same manner as the dissolution was authorized unless that authorization permitted revocation by action of the board of directors alone, in which event the board of directors may revoke without shareholder action.
(c) After the revocation of dissolution is authorized, the corporation may revoke the dissolution by delivering to the judge of probate for filing articles of revocation of dissolution, together with a copy of its articles of dissolution, that set forth:
(1) The name of the corporation;
(2) The effective date of the dissolution that was revoked;
(3) The date that the revocation of dissolution was authorized;
(4) If the corporation’s board of directors (or incorporators) revoked the dissolution effected pursuant to Section 10A-2-14.01, a statement to that effect;
(5) If the corporation’s board of directors revoked a dissolution authorized by the shareholders pursuant to Section 10A-2-14.02, a statement that revocation was permitted by action by the board of directors alone pursuant to authorization; and
(6) If shareholder action was required to revoke the dissolution effected pursuant to Section 10A-2-14.02, the information required by Section 10A-2-14.03(a)(3) or (4) or by Section 10A-2-14.03(a)(5).
(d) Revocation of dissolution is effective upon the effective date of the articles of revocation of dissolution.
(e) When the revocation of dissolution is effective, it relates back to and takes effect as of the effective date of the dissolution and the corporation resumes carrying on its business as if dissolution had never occurred.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.04; amended and renumbered by Act 2009-513, p. 967, §145.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A dissolved corporation continues its corporate existence but may not carry on any business except that appropriate to wind up and liquidate its business and affairs, including:
(1) Collecting its assets;
(2) Disposing of its properties that will not be distributed in kind to its shareholders;
(3) Discharging or making provision for discharging its liabilities;
(4) Distributing its remaining property among its shareholders according to their interests; and
(5) Doing every other act necessary to wind up and liquidate its business and affairs.
(b) Dissolution of a corporation does not:
(1) Alter the limited liability status of its subscribers and shareholders under Section 10A-2-6.22, except as provided in Section 10A-1-9.22(d)(2) with respect to assets distributed to a shareholder in liquidation;
(2) Transfer title to the corporation’s property;
(3) Prevent transfer of its shares or securities, although the authorization to dissolve may provide for closing the corporation’s share transfer records;
(4) Subject its directors or officers to standards of conduct different from those prescribed in Article 8;
(5) Change quorum or voting requirements for its board of directors or shareholders; change provisions for selection, resignation, or removal of its directors or officers or both; or change provisions for amending its bylaws;
(6) Prevent commencement of a proceeding by or against the corporation in its corporate name;
(7) Abate or suspend a proceeding pending by or against the corporation on the effective date of dissolution;
(8) Terminate the authority of the registered agent of the corporation; or
(9) Result in the corporation’s name becoming available for use by another entity under Section 10A-1-5.03 until the time for revocation of dissolution has elapsed or, in the case of a corporation administratively dissolved under Section 10A-2-14.21, the time for filing an application for reinstatement has elapsed without the filing of an application, or, if an application is filed, until its final adjudication, including all appeals.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.05; amended and renumbered by Act 2009-513, p. 967, §145.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
The Secretary of State may commence a proceeding under Section 10A-2-14.21 to administratively dissolve a corporation if:
(1) The corporation does not pay within six months after they are due any franchise taxes or penalties imposed by this chapter or other law;
(2) The corporation does not deliver its annual report to the Secretary of State within six months after it is due;
(3) The corporation is without a registered agent or registered office in this state for 60 days or more;
(4) The corporation does not notify the Secretary of State within 60 days that its registered agent or registered office has been changed, that its registered agent has resigned, or that its registered office has been discontinued; or
(5) The corporation’s period of duration stated in its articles of incorporation expires.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.20; amended and renumbered by Act 2009-513, p. 967, §147.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If the Secretary of State determines that one or more grounds exist under Section 10A-2-14.20 for dissolving a corporation, he or she shall serve the corporation with written notice of his or her determination under Section 10A-1-5.31(b), 10A-1-5.35, or 10A-1-5.36.
(b) If the corporation does not correct each ground for dissolution or demonstrate to the reasonable satisfaction of the Secretary of State that each ground determined by the Secretary of State does not exist within 60 days after service of the notice is perfected under Section 10A-1-5.31(b), 10A-1-5.35, or 10A-1-5.36, the Secretary of State shall administratively dissolve the corporation by signing a certificate of dissolution that recites the ground or grounds for dissolution and its effective date. The Secretary of State shall file the original of the certificate, deliver a copy to the judge of probate for filing, and serve a copy on the corporation under Section 10A-1-5.31(b), 10A-1-5.35, or 10A-1-5.36.
(c) A corporation administratively dissolved continues its corporate existence but may not carry on any business except that necessary to wind up and liquidate its business and affairs under Section 10A-2-14.05 and notify claimants under Sections 10A-1-9.21 and 10A-1-9.22, or to apply for reinstatement under Section 10A-2-14.22.
(d) The administrative dissolution of a corporation does not terminate the authority of its registered agent.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.21; amended and renumbered by Act 2009-513, p. 967, §147.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation administratively dissolved under Section 10A-2-14.21 may apply to the Secretary of State for reinstatement within two years after the effective date of dissolution. The application must:
(1) Recite the name and address of the corporation and the effective date of its administrative dissolution;
(2) State that the ground or grounds for dissolution either did not exist or have been eliminated;
(3) State that the corporation’s name satisfies the requirements of Sections 10A-1-5.03 and 10A-1-5.04; and
(4) Contain a certificate from the Department of Revenue reciting that all taxes owed by the corporation have been paid.
(b) If the Secretary of State determines that the application contains the information required by subsection (a) and that the information is correct, he or she shall cancel the certificate of dissolution and prepare a certificate of reinstatement that recites his or her determination and the effective date of reinstatement, file the original of the certificate and deliver a copy to the judge of probate for filing, and serve a copy on the corporation under Section 10A-1-5.31, 10A-1-5.35, or 10A-1-5.36.
(c) When reinstatement is effective, it relates back to and takes effect as of the effective date of the administrative dissolution and the corporation resumes carrying on its business as if the administrative dissolution had never occurred.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.22; amended and renumbered by Act 2009-513, p. 967, §147.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If the Secretary of State denies a corporation’s application for reinstatement following administrative dissolution, he or she shall serve the corporation under Section 10A-1-5.31, 10A-1-5.35, or 10A-1-5.36 with a written notice that explains the reason or reasons for denial.
(b) The corporation may appeal the denial of reinstatement to the circuit court of the county where its articles of incorporation are filed within 30 days after service of the notice of denial is perfected. A corporation created by an act of the Legislature prior to the adoption of the Constitution of Alabama of 1901, or which resulted from a merger or consolidation, may appeal to the Circuit Court of Montgomery County. The corporation appeals by petitioning the court to set aside the dissolution and attaching to the petition copies of the Secretary of State’s certificate of dissolution, the corporation’s application for reinstatement, and the Secretary of State’s notice of denial.
(c) The court may summarily order the Secretary of State to reinstate the dissolved corporation, may order a trial de novo, or may take other action the court considers appropriate.
(d) The court’s final decision may be appealed as in other civil proceedings.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.23; amended and renumbered by Act 2009-513, p. 967, §147.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
The circuit court of the county where a corporation’s articles of incorporation are filed, or, in the case of corporations created by an act of the Legislature prior to the adoption of the Constitution of Alabama of 1901, or which have resulted from a merger or consolidation, the Circuit Court of Montgomery County, may dissolve the corporation:
(1) In a proceeding by the Attorney General if it is established that:
(i) The corporation obtained its articles of incorporation through fraud; or
(ii) The corporation has continued to exceed or abuse the authority conferred upon it by law;
(2) In a proceeding by a shareholder if it is established that:
(i) The directors are deadlocked in the management of the corporate affairs, the shareholders are unable to break the deadlock, and irreparable injury to the corporation is threatened or being suffered, or the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally, because of the deadlock;
(ii) The directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent;
(iii) The shareholders are deadlocked in voting power and have failed, for a period that includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have expired; or
(iv) The corporate assets are being misapplied or wasted.
(3) In a proceeding by a creditor if it is established that:
(i) The creditor’s claim has been reduced to judgment, the execution on the judgment returned unsatisfied, and the corporation is insolvent; or
(ii) The corporation has admitted in writing that the creditor’s claim is due and owing and the corporation is insolvent; or
(4) In a proceeding by the corporation to have its voluntary dissolution continued under court supervision.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.30; amended and renumbered by Act 2009-513, p. 967, §149.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Venue for a proceeding to dissolve a corporation lies in the county where a corporation’s articles of incorporation are filed, or, in the case of a corporation created by an act of the Legislature prior to the adoption of the Constitution of Alabama of 1901, or which resulted from a merger or consolidation, in Montgomery County.
(b) It is not necessary to make shareholders parties to a proceeding to dissolve a corporation unless relief is sought against them individually.
(c) A court in a proceeding brought to dissolve a corporation may issue injunctions, appoint a receiver or custodian pendente lite with all powers and duties the court directs, take other action required to preserve the corporate assets wherever located, and carry on the business of the corporation until a full hearing can be held.
(d) Within 10 days of the commencement of a proceeding under Section 10A-2-14.30(2) to dissolve a corporation that has no shares listed on a national securities exchange or regularly traded in a market maintained by one or more members of a national securities exchange, the corporation must send to all shareholders, other than the petitioner, a notice stating that the shareholders are entitled to avoid the dissolution of the corporation by electing to purchase the petitioner’s shares under Section 10A-2-14.34 and accompanied by a copy of Section 10A-2-14.34.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.31; amended and renumbered by Act 2009-513, p. 967, §149.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A court in a judicial proceeding brought to dissolve a corporation may appoint one or more receivers to wind up and liquidate, or one or more custodians to manage the business and affairs of the corporation. The court shall hold a hearing, after notifying all parties to the proceeding and any interested persons designated by the court, before appointing a receiver or custodian. The court appointing a receiver or custodian has exclusive jurisdiction over the corporation and all of its property wherever located.
(b) The court may appoint an individual, domestic or foreign corporation, authorized to transact business in this state, or other entity as receiver or custodian. The court may require the receiver or custodian to post bond, with or without sureties, in an amount the court directs.
(c) The court shall describe the powers and duties of the receiver or custodian in its appointing order, which may be amended from time to time. Among other powers:
(1) The receiver (i) may dispose of all or any part of the assets of the corporation wherever located, at a public or private sale, if authorized by the court; and (ii) may sue and defend in his or her own name as receiver of the corporation in all courts of this state;
(2) The custodian may exercise all of the powers of the corporation, through or in place of its board of directors or officers, to the extent necessary to manage the affairs of the corporation in the best interests of its shareholders and creditors.
(d) The court during a receivership may redesignate the receiver a custodian, and during a custodianship may redesignate the custodian a receiver, if doing so is in the best interests of the corporation, its shareholders, and creditors.
(e) The court from time to time during the receivership or custodianship may order compensation paid and expense disbursements or reimbursements made to the receiver or custodian and his or her counsel from the assets of the corporation or proceeds from the sale of the assets.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.32; amended and renumbered by Act 2009-513, p. 967, §149.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If after a hearing the court determines that one or more grounds for judicial dissolution described in Section 10A-2-14.30 exist, it may enter a decree dissolving the corporation and specifying the effective date of the dissolution, and the clerk of the court shall deliver a certified copy of the decree to the judge of probate, who shall file it.
(b) After entering the decree of dissolution, the court shall direct the winding up and liquidation of the corporation’s business and affairs in accordance with Section 10A-2-14.05 and the notification of claimants in accordance with Sections 10A-1-9.21 and 10A-1-9.22.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.33; amended and renumbered by Act 2009-513, p. 967, §149.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) In a proceeding under Section 10A-2-14.30(2) to dissolve a corporation that has no shares listed on a national securities exchange or regularly traded in a market maintained by one or more members of a national or affiliated securities association, the corporation may elect or, if it fails to elect, one or more shareholders may elect to purchase all shares owned by the petitioning shareholder at the fair value of the shares. An election pursuant to this section shall be irrevocable unless the court determines that it is equitable to set aside or modify the election.
(b) An election to purchase pursuant to this section may be filed with the court at any time within 90 days after the filing of the petition under Section 10A-2-14.30(2) or at a later time as the court in its discretion may allow. If the election to purchase is filed by one or more shareholders, the corporation shall, within 10 days thereafter, give written notice to all shareholders, other than the petitioner. The notice must state the name and number of shares owned by the petitioner and the name and number of shares owned by each electing shareholder and must advise the recipients of their right to join in the election to purchase shares in accordance with this section. Shareholders who wish to participate must file notice of their intention to join in the purchase no later than 30 days after the effective date of the notice to them. All shareholders who have filed an election or notice of their intention to participate in the election or purchase thereby become parties to the proceeding and shall participate in the purchase in proportion to their ownership of shares as of the date the first election was filed, unless they otherwise agree or the court directs. After an election has been filed by the corporation or one or more shareholders, the proceeding under Section 10A-2-14.30(2) may not be discontinued or settled unless the court determines that it would be equitable to the corporation and the shareholders, other than the petitioner, to permit the discontinuance, settlement, sale, or other disposition.
(c) If, within 60 days of the filing of the first election, the parties reach agreement as to the fair value and terms of purchase of petitioner’s shares, the court shall enter an order directing the purchase of petitioner’s shares upon the terms and conditions agreed to by the parties.
(d) If the parties are unable to reach an agreement as provided for in subsection (c), the court, upon application by any party, shall stay the Section 10A-2-14.30(2) proceedings and determine the fair value of the petitioner’s shares as of the day before the date on which the petition under Section 10A-2-14.30(2) was filed or as of the other date the court deems appropriate under the circumstances.
(e) Upon determining the fair value of the shares, the court shall enter an order directing the purchase upon the terms and conditions as the court deems appropriate, which may include payment of the purchase price in installments, where necessary in the interest of equity, provision for security to assure payment of the purchase price and any additional costs, fees, and expenses as may have been awarded, and, if the shares are to be purchased by shareholders, the allocation of shares among them. In allocating petitioner’s shares among holders of different classes of shares, the court should attempt to preserve the existing distribution of voting rights among holders of different classes insofar as practicable and may direct that holders of a specific class or classes shall not participate in the purchase. Interest may be allowed at the rate and from the date determined by the court to be equitable, but if the court finds that the petitioning shareholder had probable grounds for relief under paragraphs (ii) or (iv) of Section 10A-2-14.30(2), it may award to the petitioning shareholder reasonable fees and expenses of counsel and of any experts employed by him or her.
(f) Upon entry of an order under subsections (c) or (e), the court shall dismiss the petition to dissolve the corporation under Section 10A-2-14.30 and the petitioning shareholder shall no longer have any rights or status as a shareholder of the corporation except the right to receive the amounts awarded to him or her by the order of the court which shall be enforceable in the same manner as any other judgment.
(g) The purchase ordered pursuant to subsection (e) shall be made within 10 days after the date the order becomes final unless before that time the corporation files with the court a notice of its intention to adopt articles of dissolution pursuant to Sections 10A-2-14.02 and 10A-2-14.03, which articles must then be adopted and filed within 50 days thereafter. Upon filing of the articles of dissolution, the corporation shall be dissolved in accordance with the provisions of Sections 10A-2-14.05 and 10A-1-9.22, and the order entered pursuant to subsection (e) shall no longer be of any force or effect, except that the court may award the petitioning shareholder reasonable fees and expenses in accordance with the provisions of the last sentence of subsection (e) and the petitioner may continue to pursue any claims previously asserted on behalf of the corporation.
(h) Any payment by the corporation pursuant to an order under subsections (c) or (e) other than an award of fees and expenses pursuant to subsection (e), is subject to the provisions of Section 10A-2-6.40.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.34; amended and renumbered by Act 2009-513, p. 967, §149.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Assets of a dissolved corporation that should be transferred to a creditor, claimant, or shareholder of the corporation who cannot be found or who is not competent to receive them shall be reduced to cash and deposited with the State Treasurer for safekeeping. When the creditor, claimant, or shareholder furnishes satisfactory proof of entitlement to the amount deposited, the State Treasurer shall pay him or her or his or her representative that amount. The assets shall be held for the owner by the State Treasurer for three years and any assets which remain unclaimed by the owner after three years shall be presumed abandoned and subject to the provisions of the Uniform Disposition of Unclaimed Property Act.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-14.40; amended and renumbered by Act 2009-513, p. 967, §151.)
[Repealed]
Repealed by Act 2012-304, effective January 1, 2014
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.01; amended and renumbered by Act 2009-513, p. 967, §153.)
[Repealed]
Repealed by Act 2012-304 effective January 1, 2014.
(Acts 1994, No. 94-245, p. 343, §1; repealed by Acts 1995, No. 95-663, p. 1374, §2; added by Acts 1995, No. 95-663, p. 1374, §3; Act 99-665, 2nd Sp. Sess., p. 131, §3; §10-2B-15.02; amended and renumbered by Act 2009-513, p. 967, §153.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
The term “foreign corporation,” as used in this division, shall mean:
(1) Any bank or other corporation now or hereafter organized or existing under the laws of any state of the United States other than the State of Alabama; and
(2) Any national banking association or other corporation organized under the laws of the United States having its principal place of business in any state of the United States other than Alabama.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.40; amended and renumbered by Act 2009-513, p. 967, §159.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Any foreign corporation may act in this state as trustee, personal representative, executor, administrator of any kind, guardian, conservator, or in any other like or similar fiduciary capacity, whether the appointment is by law, will, deed, inter vivos trust, mortgage, deed of trust, court order or otherwise, without the necessity of complying with any law of this state relating to the qualification of foreign corporations to do business in this state or the licensing of foreign corporations to do business in this state and notwithstanding any prohibition, limitation, or restriction contained in any law of this state subject to the following conditions:
(1) The foreign corporation is authorized to act in a fiduciary capacity, or capacities, in the state in which it is incorporated or, if the foreign corporation is a national banking association or other corporation organized under the laws of the United States, in the state in which it has its principal place of business.
(2) Any bank or other corporation organized under the laws of this state or a national banking association or other corporation organized under the laws of the United States having its principal place of business in this state which is authorized to act in a fiduciary capacity in this state is authorized to act in a like fiduciary capacity in the other state without the necessity of complying with any law of the other state relating to the qualification of a foreign corporation to do business in the other state.
(b) Nothing contained in this division shall be construed to prohibit or make unlawful any activity in this state by a bank or other corporation which is not incorporated under the laws of this state, or, if a national bank or other corporation organized under the laws of the United States, which does not have its principal place of business in this state which would be lawful in the absence of this division.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.41; amended and renumbered by Act 2009-513, p. 967, §159.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Prior to the time when any foreign corporation acts pursuant to the authority of this article in any fiduciary capacity or capacities in this state, the foreign corporation shall file with the Commissioner of Revenue of this state a verified statement which shall state:
(1) The correct corporate name of the foreign corporation;
(2) The name of the state under the laws of which it is incorporated or if the foreign corporation is a national banking association or other corporation organized under the laws of the United States shall state that fact;
(3) The address of its principal business office;
(4) In what fiduciary capacity, or capacities, it desires to act in the State of Alabama;
(5) That it is authorized to act in a similar fiduciary capacity or capacities in the state in which it is incorporated or, if it is a national banking association or other corporation organized under the laws of the United States, in which it has its principal place of business; and
(6) The statement shall irrevocably appoint the Commissioner of Revenue of Alabama as its true and lawful attorney to receive service of process in any action or proceeding against it relating to or growing out of any trust, estate or matter in respect of which the foreign corporation may act in this state in any fiduciary capacity.
The statement shall be verified by an officer of the foreign corporation, and there shall be filed with it the certificates of public officials and copies of documents certified by public officials as may be necessary to show that the foreign corporation is authorized to act in a fiduciary capacity or capacities similar to those in which it desires to act in the State of Alabama in the state in which it is incorporated or, if it is a national banking association or other corporation organized under the laws of the United States, in which it has its principal place of business.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.42; amended and renumbered by Act 2009-513, p. 967, §159.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
A foreign corporation, insofar as it acts in a fiduciary capacity in this state pursuant to the provisions of this division, shall not be deemed to be transacting business in this state, but no foreign corporation acting in a fiduciary capacity in this state pursuant to the provisions of this division without qualifying to do business in this state pursuant to this article or other applicable provisions of law shall establish or maintain in this state a place of business, branch office, or agency for the conduct of business as a fiduciary. Nothing contained in this division shall diminish the authority of out-of-state banks and trust companies to establish or acquire and maintain trust offices or representative trust offices, or both, under the provisions of Chapter 11A of Title 5.
(Acts 1994, No. 94-245, p. 343, §1; Act 2007-224, p. 284, §1; §10-2B-15.43; amended and renumbered by Act 2009-513, p. 967, §159.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
The provisions of this division shall not prohibit any foreign corporation authorized to act in a fiduciary capacity or capacities in the state in which it is incorporated or any national banking association or other corporation organized under the laws of the United States authorized to act in a fiduciary capacity or capacities in its principal place of business which, prior to April 14, 1956, or in the case of a corporation other than a national banking association, prior to January 1, 1995, was acting or appointed to act in this state in a particular fiduciary capacity or capacities, from continuing in the performance of the fiduciary activity or activities without complying with the provisions of this division.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.44; amended and renumbered by Act 2009-513, p. 967, §159.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Every foreign corporation acting in a fiduciary capacity in this state pursuant to the terms of this division shall be deemed to consent to service of all legal process in any action or proceeding against it and to service of any notice or demand permitted or required by law relating to or growing out of any trust, estate or matter in respect of which the foreign corporation shall have acted in this state in any fiduciary capacity pursuant to any means of service of process provided in Section 10A-1-5.31, 10A-1-5.35, or 10A-1-5.36.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-15.45; amended and renumbered by Act 2009-513, p. 967, §159.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation shall keep as permanent records minutes of all meetings of its shareholders and board of directors, a record of all actions taken by the shareholders or board of directors without a meeting, and a record of all actions taken by a committee of the board of directors in place of the board of directors on behalf of the corporation.
(b) A corporation shall maintain appropriate accounting records.
(c) A corporation or its agent shall maintain a record of its shareholders, in a form that permits preparation of a list of the names and addresses of all shareholders, in alphabetical order by class or shares showing the number and class of shares held by each.
(d) A corporation shall maintain its records in written form or in another form capable of conversion into written form within a reasonable time.
(e) Each domestic corporation and any foreign corporation having its principal office within this state shall keep a copy of the following records at its principal office:
(1) Its articles or restated articles of incorporation and all amendments to them currently in effect;
(2) Its bylaws or restated bylaws and all amendments to them currently in effect;
(3) Resolutions adopted by its board of directors creating one or more classes or series of shares, and fixing their relative rights, preferences, and limitations, if shares issued pursuant to those resolutions are outstanding;
(4) The minutes of all shareholders’ meetings, and records of all actions taken by shareholders without a meeting, for the past three years;
(5) All written communications to shareholders generally within the past three years, including the financial statements furnished for the past three years under Section 10A-2-16.20;
(6) A list of the names and business addresses of its current directors and officers; and
(7) Its most recent annual report delivered to the Secretary of State under Section 10A-2-16.22, or public record information filed with the Department of Revenue in lieu thereof.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-16.01; amended and renumbered by Act 2009-513, p. 967, §161.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A shareholder of a domestic corporation or of a foreign corporation with its principal office within this state is entitled to inspect and copy, during regular business hours at the corporation’s principal office, or if its principal office is outside this state, at a reasonable location within this state, specified by the corporation, any of the records of the corporation described in Section 10A-2-16.01(e) if he or she gives the corporation written notice of his or her demand at least five business days before the date on which he or she wishes to inspect and copy.
(b) A shareholder of a domestic corporation or of a foreign corporation with its principal office within this state who shall have been a holder of record of shares for 180 days immediately preceding his or her demand or who is the holder of record of at least five percent of the outstanding shares is entitled to inspect and copy during regular business hours at a reasonable location within this state specified by the corporation, or in the case of accounting records of the corporation, if the records are maintained outside the state and inspection and copying within this state is impracticable, at a reasonable location outside the state specified by the corporation, for any proper purpose, all of its books, papers, records of account, minutes and record of shareholders, if the shareholder gives the corporation written notice of his or her demand, stating the purpose therefor, at least five business days before the date on which he or she wishes to inspect and copy. Provided, however, if a corporation is engaged in the business of banking, its books and records of account and minutes relating to the private financial affairs of borrowers and depositors who are neither officers, directors, or employees of the corporation nor related to or engaged in business with an officer, director, or employee shall not be subject to examination by the shareholder or by his or her agent or attorney in the absence of an order of a court of competent jurisdiction, after inspection of the books and records of account and minutes in camera, that the examination is necessary; and the order shall be subject to review in the Supreme Court of Alabama on writ of mandamus. Provided, further, that if a corporation is engaged in the business of banking, its books and records of account and minutes shall be deemed not to include any reports of examination by state or federal supervisory agencies nor any actions taken nor reports made by the corporation to bank supervisory authorities pursuant thereto.
(c) Any officer or agent who, or a corporation which, without reasonable cause, shall refuse to allow any shareholder, or his or her agent or attorney so to examine and make copies of and extracts from its books, papers, records of account, minutes and record of shareholders, for any proper purpose, shall be liable to the shareholder for a penalty of an amount not to exceed 10 percent of the value of the shares owned by the shareholder, in addition to any other damages or remedy afforded him or her by law. It shall be a defense to an action brought to collect the penalty specified in this section that the person suing therefor within the two years next preceding the demand has sold or offered for sale any list of shareholders of the corporation, or any other corporation or knowingly has aided or abetted any person in procuring any list of shareholders, or improperly has used any information secured through any prior examination of the books, papers, records of account, minutes or record of shareholders, or was not acting in good faith or for a proper purpose in making this demand.
(d) The right of inspection granted by this section may not be abolished or limited by a corporation’s articles of incorporation or bylaws.
(e) This section does not affect:
(1) The right of a shareholder to inspect records under Section 10A-2-7.20 or, if the shareholder is in litigation with the corporation, to the same extent as any other litigant; or
(2) The power of a court, independently of this chapter, to compel the production of corporate records for examination.
(f) For purposes of this section, “shareholder” includes a beneficial owner whose shares are held in a voting trust or by a nominee on his or her behalf.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-16.02; amended and renumbered by Act 2009-513, p. 967, §161.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A shareholder’s agent or attorney has the same inspection and copying rights as the shareholder he or she represents.
(b) The right to copy records under Section 10A-2-16.02 includes, if reasonable, the right to receive copies made by photographic, xerographic, or other means.
(c) The corporation may impose a reasonable charge, covering the costs of labor and material, for copies of any documents provided to the shareholder. The charge may not exceed the estimated cost of reproduction of the records.
(d) The corporation may comply with a shareholder’s demand to inspect the record of shareholders under Section 10A-2-16.02(b) by providing him or her with a list of its shareholders that was compiled no earlier than the date of the shareholder’s demand.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-16.03; amended and renumbered by Act 2009-513, p. 967, §161.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) If a domestic corporation or a foreign corporation with its principal office within this state does not allow a shareholder who complies with Section 10A-2-16.02(a) to inspect and copy any records required by that subsection to be available for inspection, the circuit court of the county where the corporation’s principal office, or, if none in this state, its registered office, is located may summarily order inspection and copying of the records demanded at the corporation’s expense upon application of the shareholder.
(b) If a domestic corporation or a foreign corporation with its principal office within this state does not within a reasonable time allow a shareholder to inspect and copy any other record, the shareholder who complies with Section 10A-2-16.02(b) and (c) may apply to the circuit court in the county where the corporation’s principal office, or, if none in this state, its registered office, is located for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this subsection on an expedited basis.
(c) If the court orders inspection and copying of the records demanded, it shall, in addition to any penalty or damages for which there is liability under Section 10A-2-16.02(c), also order the corporation to pay the shareholder’s costs, including reasonable counsel fees, incurred to obtain the order unless the corporation proves that it refused inspection in good faith because it had a reasonable basis for doubt about the right of the shareholder to inspect the records demanded.
(d) If the court orders inspection and copying of the records demanded, it may impose reasonable restrictions on the use or distribution of the records by the demanding shareholder.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-16.04; amended and renumbered by Act 2009-513, p. 967, §161.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) A corporation shall furnish its annual financial statements to each shareholder who requests a statement, which may be consolidated or combined statements of the corporation and one or more of its subsidiaries, as appropriate, that include a balance sheet as of the end of the fiscal year, an income statement for that year, and a statement of changes in shareholders’ equity for the year unless that information appears elsewhere in the financial statements. If financial statements are prepared for the corporation on the basis of generally accepted accounting principles, the annual financial statements must also be prepared on that basis. If the financial statements for the corporation are not prepared on the basis of generally accepted accounting principles, the annual financial statements furnished shareholders may be prepared either on the same basis used by the corporation for filing its United States income tax returns or as required by appropriate regulatory agencies.
(b) If the annual financial statements are reported upon by a public accountant or certified public accountant, his or her report must accompany them. If not, the statements must be accompanied by a statement of the president or the person responsible for the corporation’s accounting records:
(1) Stating his or her reasonable belief whether the statements were prepared on the basis of generally accepted accounting principles and, if not, describing the basis of preparation; and
(2) Describing any respects in which the statements were not prepared on a basis of accounting consistent with the statements prepared for the preceding year.
(c) A corporation shall mail or deliver by electronic transmission the annual financial statements to each shareholder who requests a statement within 120 days after the close of each fiscal year. Thereafter, on written request from a shareholder who was not mailed the statements, the corporation shall mail or deliver by electronic transmission him or her the latest annual financial statements.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-16.20; amended and renumbered by Act 2009-513, p. 967, §163; Act 2009-634, p. 1945, §1.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
If a corporation indemnifies or advances expenses to a director under Section 10A-2-8.51, 10A-2-8.53, or 10A-2-8.54, or under Article 6 of Chapter 1, or under any other provision of this title, in connection with a proceeding by or in the right of the corporation, the corporation shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders’ meeting.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-16.21; amended and renumbered by Act 2009-513, p. 967, §163.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(a) Each domestic corporation, and each foreign corporation authorized to transact business in this state, shall deliver to the Secretary of State for filing an annual report that sets forth:
(1) The name of the corporation and the state or other jurisdiction under whose law it is incorporated;
(2) The address of its registered office and the name of its registered agent at that office in this state;
(3) The address of its principal office including, in the case of a foreign corporation, the address of its principal office in the state or other jurisdiction under whose law it is incorporated;
(4) The names and respective addresses of its president and secretary; and
(5) A brief statement of the character of business in which it is actually engaged in this state.
(b) Information in the annual report must be current as of the date the annual report is executed on behalf of the corporation.
(c) The first annual report must be delivered to the Secretary of State between January 1 and March 15 of the year following the calendar year in which a domestic corporation was incorporated or a foreign corporation was authorized to transact business. Subsequent annual reports must be delivered to the Secretary of State between January 1 and March 15 of the following calendar years.
(d) If an annual report does not contain the information required by this section, the Secretary of State shall promptly notify the reporting domestic or foreign corporation in writing and return the report to it for correction. If the report is corrected to contain the information required by this section and delivered to the Secretary of State within 30 days after the effective date of notice, it is deemed to be timely filed.
(e) The public record information filed with the Department of Revenue, pursuant to Chapter 14A of Title 40 shall constitute and be accepted in lieu of the annual report required pursuant to this section, provided that a ten dollar ($10) fee for the State of Alabama accompany the public record information filed by the corporation annually with the Department of Revenue. The fee for the annual report shall be deposited in the State Treasury to the credit of the Secretary of State Entity Fund as prescribed by Section 10A-1-4.31.
(Acts 1994, No. 94-245, p. 343, §1; Act 99-665, 2nd Sp. Sess., p. 131, §4; §10-2B-16.22; amended and renumbered by Act 2009-513, p. 967, §163.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
This chapter and the provisions of Chapter 1 to the extent applicable to business corporations apply to all existing corporations organized under any general or special law of this state providing for the organization of corporations for a purpose or purposes for which a corporation might be organized under this chapter, where the power has been reserved to amend, repeal or modify the law under which the corporation was organized.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-17.01; amended and renumbered by Act 2009-513, p. 967, §165.)
[Repealed]
REPEALED IN THE 2019 REGULAR SESSION BY ACT 2019-94 EFFECTIVE JANUARY 1, 2020. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
A foreign corporation authorized to transact business in this state on the effective date of this title is subject to this chapter but is not required to renew its registration to transact business hereunder.
(Acts 1994, No. 94-245, p. 343, §1; §10-2B-17.02; amended and renumbered by Act 2009-513, p. 967, §165.)
(a) This chapter and the provisions of Chapter 1, to the extent applicable to business corporations, shall be known and may be cited as the Alabama Business Corporation Law.
(b) This chapter and the provisions of Chapter 1, to the extent applicable to business corporations, apply to a corporation incorporated and existing under this chapter or any predecessor law regarding business corporations, and to a foreign corporation that is transacting business in this state, regardless of whether the foreign corporation is registered to transact business in this state. Without in any way limiting the generality of any provision of this chapter or of any provision of Chapter 1, this chapter and the provisions of Chapter 1, to the extent applicable to corporations, shall apply to banks, trust companies, savings and loan associations, insurance companies, public utilities, and railroad companies, except to the extent, if any, that any provision of this chapter or of Chapter 1 is inconsistent with other statutes of this state specifically applicable to those entities.
(Act 2019-94, §1.)
(a) Whenever any filing instrument is to be filed with the Secretary of State or in accordance with this chapter, such instrument shall be executed as follows:
(1) Except as provided in subsection (a)(3), the certificate of incorporation, and any other instrument to be filed before the election of the initial board of directors if the initial directors were not named in the certificate of incorporation, shall be signed by the incorporator or incorporators or the successors and assigns of the incorporator or incorporators. If any incorporator is not available then any other instrument may be signed, with the same effect as if the incorporator had signed it, by any person for whom or on whose behalf the incorporator, in executing the certificate of incorporation, was acting directly or indirectly as employee or agent, provided that the other instrument shall state that the incorporator is not available and the reason therefor, that the incorporator in executing the certificate of incorporation was acting directly or indirectly as employee or agent for or on behalf of the person, and that the person’s signature on the instrument is otherwise authorized and not wrongful.
(2) Except as provided in subsection (a)(3), all other filing instruments shall be signed:
(i) by any authorized officer of the corporation; or
(ii) if it shall appear from the filing instrument that there are no such officers, then by a majority of the directors or by such directors as may be designated by the board of directors; or
(iii) if it shall appear from the filing instrument that there are no such officers or directors, then by the holders of record, or such of them as may be designated by the holders of record, of a majority of all outstanding shares of stock; or
(iv) by the holders of record of all outstanding shares of stock.
(3) If the corporation is in the hands of a receiver, trustee, or other court-appointed fiduciary, by that fiduciary.
(b) The person executing the filing instrument shall sign it and state beneath or opposite the person’s signature the person’s name and the capacity in which the filing instrument is signed. The filing instrument may, but need not, contain a corporate seal, attestation, acknowledgment, or verification.
(c) Whenever a provision of this chapter permits any of the terms of a plan or a filing instrument to be dependent on facts objectively ascertainable outside the plan or filing instrument, the following provisions apply:
(1) The manner in which the facts will operate upon the terms of the plan or filing instrument must be set forth in the plan or filing instrument.
(2) The facts may include:
(i) any of the following that are available in a nationally recognized news or information medium either in print or electronically: statistical or market indices, market prices of any security or group of securities, interest rates, currency exchange rates, or similar economic or financial data;
(ii) a determination or action by any person or body, including the corporation or any other party to a plan or filing instrument; or
(iii) the terms of, or actions taken under, an agreement to which the corporation is a party, or any other agreement or document.
(3) As used in this subsection (c), “plan” means a plan of conversion, merger, or share exchange.
(4) The following provisions of a plan or filing instrument may not be made dependent on facts outside the plan or filed document:
(i) the name and address of any person required in a filing instrument;
(ii) the registered office of any entity required in a filing instrument;
(iii) the registered agent of any entity required in a filing instrument;
(iv) the number of authorized shares of stock and designation of each class or series of stock;
(v) the effective date and time of a filing instrument as determined under Article 4 of Chapter 1; and
(vi) any required statement in a filing instrument of the date on which the underlying transaction was approved or the manner in which that approval was given.
(5) If a provision of a filing instrument is made dependent on a fact ascertainable outside of the filing instrument, and that fact is neither ascertainable by reference to a source described in subsection (c)(2)(i) or a document that is a matter of public record, nor have the affected stockholders received notice of the fact from the corporation, then the corporation shall file with the Secretary of State a certificate of amendment to the filing instrument setting forth the fact promptly after the time when the fact referred to is first ascertainable or thereafter changes. A certificate of amendment under this subsection (c)(5) is deemed to be authorized by the authorization of the original filing instrument to which it relates and may be filed by the corporation without further action by the board of directors or the stockholders.
(Act 2019-94, §1.)
(a) The Secretary of State, upon request and payment of the requisite fee, shall furnish to any person a certificate of existence for a corporation if the writings filed in the office of the Secretary of State show that the corporation has been incorporated under the laws of this state. A certificate of existence shall reflect only the information on file with the Secretary of State. A certificate of existence must state:
(1) the corporation’s name;
(2) that the corporation was incorporated under the laws of this state, the date of incorporation, and the filing office in which the certificate of incorporation was filed;
(3) whether the corporation has delivered to the Secretary of State for filing a certificate of dissolution;
(4) whether the corporation has delivered to the Secretary of State for filing a certificate of reinstatement; and
(5) other facts of record in the office of the Secretary of State that are specified by the person requesting the certificate.
(b) The Secretary of State, upon request and payment of the requisite fee, shall furnish to any person a certificate of registration for a foreign corporation if the writings filed in the office of the Secretary of State show that the Secretary of State has filed an application for registration for authority to transact business in this state and the registration has not been revoked, withdrawn, or terminated. A certificate of registration must state:
(1) the foreign corporation’s name and any alternate name adopted for use in this state;
(2) that the foreign corporation is authorized to transact business in this state;
(3) that the Secretary of State has not revoked the foreign corporation’s registration;
(4) that the foreign corporation has not filed with the Secretary of State a certificate of withdrawal or otherwise terminated its registration; and
(5) other facts of record in the office of the Secretary of State that are specified by the person requesting the certificate.
(c) Subject to any qualification stated in the certificate, a certificate of existence or certificate of registration issued by the Secretary of State is conclusive evidence that the corporation is in existence or the foreign corporation is authorized to transact business in this state.
(Act 2019-94, §1.)
As used in this chapter, unless otherwise specified or unless the context otherwise requires, the following terms have the following meanings:
(1) AUTHORIZED STOCK means the stock of all classes and series a corporation or foreign corporation is authorized to issue.
(2) BENEFICIAL STOCKHOLDER means a person who owns the beneficial interest in stock, which is either a record stockholder or a person on whose behalf shares of stock are registered in the name of an intermediary or nominee.
(3) CERTIFICATE OF INCORPORATION means the certificate of incorporation described in Section 10A-2A-2.02, all amendments to the certificate of incorporation, and any other documents permitted or required to be delivered for filing by a corporation with the Secretary of State under this chapter or Chapter 1 that modify, amend, supplement, restate, or replace the certificate of incorporation. After the filing of a filing instrument under this chapter or Chapter 1 that restates or amends and restates the certificate of incorporation in its entirety, the certificate of incorporation shall not include any prior documents, but the original date of incorporation shall remain unchanged. When used with respect to a corporation incorporated and existing on December 31, 2019, under a predecessor law of this state, the term “certificate of incorporation” means articles of incorporation, charter, or similar incorporating document, and all amendments and restatements to the certificate of incorporation, charter, or similar incorporating document. When used with respect to a foreign corporation, a nonprofit corporation, or a foreign nonprofit corporation, the “certificate of incorporation” of such an entity means the document of such entity that is equivalent to the certificate of incorporation of a corporation. The term “certificate of incorporation” as used in this chapter is synonymous to the term “certificate of formation” used in Chapter 1.
(4) CORPORATION, except in the phrase foreign corporation, means an entity incorporated or existing under this chapter.
(5) DELIVER or DELIVERY means any method of delivery used in conventional commercial practice, including delivery by hand, mail, commercial delivery, and, if authorized in accordance with Section 10A-2A-1.41, by electronic transmission.
(6) DISTRIBUTION means a direct or indirect transfer of cash or other property (except a corporation’s own stock) or incurrence of indebtedness by a corporation to or for the benefit of its stockholders in respect of any of its stock. A distribution may be in the form of a payment of a dividend; a purchase, redemption, or other acquisition of stock; a distribution of indebtedness; a distribution in liquidation; or otherwise.
(7) DOCUMENT means a writing as defined in Chapter 1.
(8) EFFECTIVE DATE, when referring to a document accepted for filing by the Secretary of State, means the time and date determined in accordance with Article 4 of Chapter 1.
(9) ELECTRONIC MAIL means an electronic transmission directed to a unique electronic mail address.
(10) ELECTRONIC MAIL ADDRESS means a destination, commonly expressed as a string of characters, consisting of a unique user name or mailbox (commonly referred to as the “local part” of the address) and a reference to an internet domain (commonly referred to as the “domain part” of the address), whether or not displayed, to which electronic mail can be sent or delivered.
(11) ELIGIBLE ENTITY means an unincorporated entity, foreign unincorporated entity, nonprofit corporation, or foreign nonprofit corporation.
(12) ELIGIBLE INTERESTS means interests or memberships.
(13) EMPLOYEE includes an officer, but not a director. A director may accept duties that make the director also an employee.
(14) ENTITY includes corporation; foreign corporation; nonprofit corporation; foreign nonprofit corporation; estate; trust; unincorporated entity; foreign unincorporated entity; and state, United States, and foreign government.
(15) EXPENSES means reasonable expenses of any kind that are incurred in connection with a matter.
(16) FILING ENTITY means an unincorporated entity, other than a limited liability partnership, that is of a type that is created by filing a public organic record or is required to file a public organic record that evidences its creation.
(17) FOREIGN CORPORATION means a corporation incorporated under a law other than the law of this state which would be a corporation if incorporated under the law of this state.
(18) FOREIGN NONPROFIT CORPORATION means a corporation incorporated under a law other than the law of this state which would be a nonprofit corporation if incorporated under the law of this state.
(19) GOVERNING STATUTE means the statute governing the internal affairs of a corporation, foreign corporation, nonprofit corporation, foreign nonprofit corporation, unincorporated entity, or foreign unincorporated entity.
(20) GOVERNMENTAL SUBDIVISION includes authority, county, district, and municipality.
(21) INCLUDES and INCLUDING denote a partial definition or a nonexclusive list.
(22) INTEREST means either or both of the following rights under the governing statute governing an unincorporated entity:
(i) the right to receive distributions from the entity either in the ordinary course or upon liquidation; or
(ii) the right to receive notice or vote on issues involving its internal affairs, other than as an agent, assignee, proxy, or person responsible for managing its business and affairs.
(23) INTEREST HOLDER means a person who holds of record an interest.
(24) KNOWLEDGE is determined as follows:
(a) A person knows a fact when the person:
(1) has actual knowledge of it; or
(2) is deemed to know it under law other than this chapter.
(b) A person has notice of a fact when the person:
(1) knows of it;
(2) receives notification of it in accordance with Section 10A-2A-1.41;
(3) has reason to know the fact from all of the facts known to the person at the time in question; or
(4) is deemed to have notice of the fact under subsection (d).
(c) A person notifies another of a fact by taking steps reasonably required to inform the other person in ordinary course in accordance with Section 10A-2A-1.41, whether or not the other person knows the fact.
(d) A person is deemed to have notice of a corporation’s:
(1) matters included in the certificate of incorporation upon filing;
(2) dissolution, 90 days after a certificate of dissolution under Section 10A-2A-14.03 becomes effective;
(3) conversion, merger, or interest exchange under Article 9 or Article 11, 90 days after a statement of conversion, or statement of merger or interest exchange becomes effective;
(4) conversion or merger under Article 8 of Chapter 1, 90 days after a statement of conversion or statement of merger becomes effective; and
(5) revocation of dissolution and reinstatement, 90 days after certificate of revocation of dissolution and reinstatement under Section 10A-2A-14.04 becomes effective.
(e) A stockholder’s knowledge, notice, or receipt of a notification of a fact relating to the corporation is not knowledge, notice, or receipt of a notification of a fact by the corporation solely by reason of the stockholder’s capacity as a stockholder.
(f) The date and time of the effectiveness of a notice delivered in accordance with Section 10A-2A-1.41, is determined by Section 10A-2A-1.41.
(25) MEANS denotes an exhaustive definition.
(26) MEMBERSHIP means the rights of a member in a nonprofit corporation or foreign nonprofit corporation.
(27) ORGANIZATIONAL DOCUMENTS means the public organic record and private organizational documents of a corporation, foreign corporation, or eligible entity.
(28) PRINCIPAL OFFICE means the office (in or out of this state) where the principal executive offices of the corporation or foreign corporation are located.
(29) PRIVATE ORGANIZATIONAL DOCUMENTS means (i) the bylaws of a corporation, foreign corporation, nonprofit corporation, or foreign nonprofit corporation, or (ii) the rules, regardless of whether in writing, that govern the internal affairs of an unincorporated entity or foreign unincorporated entity, are binding on all its interest holders, and are not part of its public organic record, if any. Where private organizational documents have been amended or restated, the term means the private organizational documents as last amended or restated.
(30) PROCEEDING includes any civil suit and criminal, administrative, and investigatory action.
(31) PUBLIC ORGANIC RECORD means (i) the certificate of incorporation of a corporation, foreign corporation, nonprofit corporation, or foreign nonprofit corporation, or (ii) the document, if any, the filing of which is required to create an unincorporated entity or foreign unincorporated entity, or which creates the unincorporated entity or foreign unincorporated entity and is required to be filed. Where a public organic record has been amended or restated, the term means the public organic record as last amended or restated.
(32) RECORD DATE means the date fixed for determining the identity of the corporation’s stockholders and their stockholdings for purposes of this chapter. Unless another time is specified when the record date is fixed, the determination shall be made as of the close of business at the principal office of the corporation on the date so fixed.
(33) RECORD STOCKHOLDER means (i) the person in whose name shares of stock are registered in the records of the corporation, or (ii) the person identified as the beneficial owner of stock in a beneficial ownership certificate pursuant to Section 10A-2A-7.23 on file with the corporation to the extent of the rights granted by such certificate.
(34) SECRETARY means the corporate officer to whom the board of directors has delegated responsibility under Section 10A-2A-8.40(c) to maintain the minutes of the meetings of the board of directors and of the stockholders and for authenticating records of the corporation.
(35) STOCK EXCHANGE means a transaction pursuant to Section 10A-2A-11.03.
(36) STOCKHOLDER means a record stockholder.
(37) STOCK means the units into which the proprietary interests in a corporation or foreign corporation are divided.
(38) TYPE OF ENTITY means a generic form of entity: (i) recognized at common law; or (ii) formed under a governing statute, regardless of whether some entities formed under that law are subject to provisions of that law that create different categories of the form of entity.
(39) UNINCORPORATED ENTITY means an organization or artificial legal person that either has a separate legal existence or has the power to acquire an estate in real property in its own name and that is not any of the following: a corporation, foreign corporation, nonprofit corporation, foreign nonprofit corporation, a series of a limited liability company or of another type of entity, an estate, a trust, a state, United States, or foreign government. The term includes a general partnership, limited liability company, limited partnership, business trust, joint stock association, and unincorporated nonprofit association.
(40) UNITED STATES includes any district, authority, bureau, commission, department, and any other agency of the United States.
(41) UNRESTRICTED VOTING TRUST BENEFICIAL OWNER means, with respect to any stockholder rights, a voting trust beneficial owner whose entitlement to exercise the stockholder right in question is not inconsistent with the voting trust agreement.
(42) VOTING GROUP means all stock of one or more classes or series that under the certificate of incorporation or this chapter are entitled to vote and be counted together collectively on a matter at a meeting of stockholders. All stock entitled by the certificate of incorporation or this chapter to vote generally on the matter is for that purpose a single voting group.
(43) VOTING POWER means the current power to vote in the election of directors.
(44) VOTING TRUST BENEFICIAL OWNER means an owner of a beneficial interest in stock of the corporation held in a voting trust established pursuant to Section 10A-2A-7.30(a).
(Act 2019-94, §1; Act 2020-73, §7; Act 2021-299, §3; Act 2023-503, §3; Act 2024-413, §1; Act 2024-213, §1.)
(a) A notice under this chapter must be in writing unless oral notice is reasonable in the circumstances. Unless otherwise agreed between the sender and the recipient, words in a notice or other communication under this chapter must be in English.
(b) A notice or other communication may be given by any method of delivery, except that notice or other communication by electronic transmission must be in accordance with this section. If the methods of delivery are impracticable, a notice or other communication from the corporation may be given by means of a broad non-exclusionary distribution to the public (which may include a newspaper of general circulation in the area where published; radio, television, or other form of public broadcast communication; or other methods of distribution that the corporation has previously identified to its stockholders).
(c) A notice or other communication to a corporation or to a foreign corporation registered to transact business in this state may be delivered to the corporation’s registered agent at its registered office or to the secretary at the corporation’s principal office or, in the case of a foreign corporation, in its foreign registration under Chapter 1.
(d) A notice or other communications from the corporation to a stockholder may be delivered by electronic mail to the electronic mail address for that stockholder required to be included in the record of stockholders maintained pursuant to Section 10A-2A-16.01(d), unless that stockholder has previously notified the corporation in writing that the stockholder objects to receiving notices and other communications by electronic mail. Any notice or communication may be delivered by another form of electronic transmission if consented to by the stockholder or if authorized by subsection (j). Any notice or other communication from the corporation to any other person may be delivered by electronic transmission if consented to by the recipient or if authorized by subsection (j). Any consent given under this subsection or subsection (j) may be revoked with respect to future notices or communications by the person who consented by written notice to the person to whom the consent was delivered.
(e) A notice or other communication may no longer be delivered to an electronic mail address or other electronic transmission address pursuant to subsection (d) if (i) the corporation receives notice from the information processing system into which the notice or other communication was entered that two consecutive notices or other communications given by electronic transmissions have not been delivered to the electronic mail address or other electronic transmission address to which the notice or other communication was directed, and (ii) the notice of non-delivery becomes known to the secretary or an assistant secretary or to the transfer agent, or another person responsible for the giving of notices or other communications for the corporation; provided, however, the inadvertent failure to recognize the notice of non-delivery as a cessation of authority to provide a stockholder with notice by electronic mail or other electronic transmission shall not invalidate any meeting or other action.
(f) Unless otherwise agreed between the sender and the recipient, a notice or other communication by electronic transmission is received when:
(1) it enters an information processing system directed to (i) in the case of a stockholder, the electronic mail address for the stockholder required to be included in the record of stockholders maintained pursuant to Section 10A-2A-16.01(d) or other electronic transmission address at which the stockholder has consented to receive notice or other communications by electronic transmission, or (ii) in the case of any other recipient, the electronic transmission address at which the recipient has consented to receive notice or other communications by electronic transmission; and
(2) it is in a form capable of being processed by that system.
(g) Receipt of an electronic acknowledgement from an information processing system described in subsection (f)(1) establishes that an electronic transmission was received but, by itself, does not establish that the content sent corresponds to the content received.
(h) An electronic transmission is received under this section even if no person is aware of its receipt.
(i) A notice or other communication, if in a comprehensible form or manner, is effective at the earliest of the following:
(1) if in a physical form, the earliest of when it is actually received, or when it is left at:
(i) a stockholder’s address included in the record of stockholders maintained pursuant to Section 10A-2A-16.01(d);
(ii) a director’s residence or usual place of business; or
(iii) the corporation’s principal office;
(2) if mailed by United States mail postage prepaid and addressed to a stockholder at the stockholder’s address included in the record of stockholders maintained pursuant to Section 10A-2A-16.01(d), upon deposit in the mail;
(3) if mailed by United States mail postage prepaid and addressed to a recipient other than a stockholder at the address included in the corporation’s records, the earliest of when it is actually received, or:
(i) if sent by registered or certified mail, return receipt requested, the date shown on the return receipt signed by or on behalf of the addressee; or
(ii) five days after it is deposited in the United States mail;
(4) if sent by a nationally recognized commercial carrier that issues a receipt or other confirmation of delivery, the earliest of when it is actually received or the date shown on the receipt or other confirmation of delivery issued by the commercial carrier;
(5) if an electronic transmission, when it is received as provided in subsection (f); and
(6) if oral, when communicated.
(j) A notice or other communication may be in the form of an electronic transmission that cannot be directly reproduced in paper form by the recipient through an automated process used in conventional commercial practice only if (i) the electronic transmission is otherwise retrievable in perceivable form, and (ii) the sender and the recipient have consented in writing to the use of such form of electronic transmission.
(k) If this chapter prescribes requirements for notices or other communications in particular circumstances, those requirements govern. If the certificate of incorporation or bylaws prescribe requirements for notices or other communications, not inconsistent with this section or other provisions of this chapter, those requirements govern. The certificate of incorporation or bylaws may authorize or require delivery of notices of meetings of directors by electronic transmission.
(l) In the event that any provisions of this chapter are deemed to modify, limit, or supersede the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §§ 7001 et seq., the provisions of this chapter shall control to the maximum extent permitted by 15 U.S.C. § 7002(a)(2).
(m) Whenever a notice or communication would otherwise be required to be given under this chapter to a stockholder, the notice or communication need not be given if the corporation is not permitted to deliver the notice or communication by electronic transmission pursuant to subsections (d) and (e) and:
(1) notices and communications to stockholders of two consecutive annual meetings, and all notices and communications of meetings during the period between those two consecutive annual meetings, have been sent to that stockholder at that stockholder’s address included in the record of stockholders maintained pursuant to Section 10A-2A-16.01(d) and have been returned undeliverable or could not be delivered; or
(2) all, but not less than two, distributions to stockholders during a 12-month period, or two consecutive distributions to stockholders during a period of more than 12 months, have been sent to that stockholder at that stockholder’s address included in the record of stockholders maintained pursuant to Section 10A-2A-16.01(d) and have been returned undeliverable or could not be delivered; or
(3) no address has been provided to the corporation by or on behalf of a stockholder and the corporation has not otherwise obtained an address for that stockholder it believes to be reliable.
In addition, if any stockholder to which this subsection (m) applies delivers to the corporation a written notice or communication setting forth that stockholder’s then-current address, the requirement that notice and communication be given to that stockholder shall be reinstated.
(n) Whenever a notice or communication is required to be given, under this chapter or the certificate of incorporation or bylaws of any corporation, to any person with whom notice to or communication with is unlawful, the giving of the notice or communication to that person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give the notice or communication to that person. Any action or meeting which shall be taken or held without notice or communication to the person with whom notice to or communication with is unlawful shall have the same force and effect as if the notice or communication had been duly given. In the event that the action taken by the corporation is such as to require the filing of a certificate or other filing instrument under any other sections of this chapter, the certificate or other filing instrument shall state, if that is the fact and if notice or communication is required, that notice or communication was given to all persons entitled to receive notice or communication except those persons with whom notice to or communication with is unlawful.
(Act 2019-94, §1; Act 2020-73, §7; Act 2021-299, §3; Act 2024-213, §1.)
(a) For purposes of this chapter, the following identified as a stockholder in a corporation’s current record of stockholders constitutes one stockholder:
(1) three or fewer co-owners;
(2) a corporation, partnership, trust, estate, or other entity; and
(3) the trustees, guardians, custodians, or other fiduciaries of a single trust, estate, or account.
(b) For purposes of this chapter, stockholdings registered in substantially similar names constitute one stockholder if it is reasonable to believe that the names represent the same person.
(Act 2019-94, §1.)
(a) As used in this chapter, unless otherwise specified or unless the context otherwise requires, a “qualified director” is a director who, at the time action is to be taken under:
(1) Section 10A-2A-2.02(b)(6), is not a director (i) to whom the limitation or elimination of the duty of an officer to offer potential corporate opportunities to the corporation would apply or (ii) who has a material relationship with any other person to whom the limitation or elimination would apply; or
(2) Section 10A-2A-8.53 or Section 10A-2A-8.55, (i) is not a party to the proceeding, (ii) is not a director as to whom a transaction is a conflicting interest transaction or who sought a disclaimer of the corporation’s interest in a corporate opportunity under Section 10A-2A-8.70, which transaction or disclaimer is challenged, and (iii) does not have a material relationship with a director described in either clause (i) or clause (ii) of this subsection (a)(2); or
(3) Section 10A-2A-8.60, is not a director (i) as to whom the act or transaction is a conflicting interest transaction, (ii) who has a material relationship with another director as to whom the act or transaction is a conflicting interest transaction, or (iii) who has a material relationship with a stockholder as to whom the act or transaction is a controlling stockholder transaction or a going private transaction; or
(4) Section 10A-2A-8.70, is not a director who (i) pursues or takes advantage of a corporate opportunity, directly or indirectly, through or on behalf of another person or (ii) has a material relationship with a director or officer who pursues or takes advantage of a corporate opportunity, directly or indirectly, through or on behalf of another person.
(b) As used in this chapter, unless otherwise specified or unless the context otherwise requires, a “material relationship” means a familial, financial, professional, employment, or other relationship that (i) in the case of a director, would reasonably be expected to impair the objectivity of the director’s judgment when participating in the negotiation, authorization, or approval of the act or transaction at issue and (ii) in the case of a stockholder, would be material to that stockholder.
(c) The presence of one or more of the following circumstances shall not automatically prevent a director from being a qualified director:
(1) designation, nomination, or vote in the election of the director to the current board of directors by any director who is not a qualified director with respect to the matter (or by any person that has a material financial interest in an act or transaction), acting alone or participating with others; or
(2) service as a director of another corporation of which a director who is not a qualified director with respect to the matter (or any individual who has a material relationship with that director), is or was also a director.
(Act 2019-94, §1; Act 2023-503, §3; Act 2026-495, §1.)
(a) A corporation has delivered written notice or any other report or statement under this chapter, the certificate of incorporation, or the bylaws to all stockholders who share a common address if:
(1) the corporation delivers one copy of the notice, report, or statement to the common address;
(2) the corporation addresses the notice, report, or statement to those stockholders either as a group or to each of those stockholders individually or to the stockholders in a form to which each of those stockholders has consented; and
(3) each of those stockholders consents to delivery of a single copy of such notice, report, or statement to the stockholders’ common address.
(b) Any such consent described in subsection (a)(2) or (a)(3) shall be revocable by any stockholders who deliver written notice of revocation to the corporation. If a written notice of revocation is delivered, the corporation shall begin providing individual notices, reports, or other statements to the revoking stockholder no later than 30 days after delivery of the written notice of revocation.
(c) Any stockholder who fails to object by written notice to the corporation, within 60 days of written notice by the corporation of its intention to deliver single copies of notices, reports, or statements to stockholders who share a common address as permitted by subsection (a), shall be deemed to have consented to receiving such single copy at the common address; provided that the notice of intention explains that consent may be revoked and the method for revoking.
(Act 2019-94, §1.)
In this article:
(1) “Corporate action” means any action taken by or on behalf of the corporation, including any action taken by the incorporator, the board of directors, a committee of the board of directors, an officer or agent of the corporation or the stockholders.
(2) “Date of the defective corporate action” means the date (or the approximate date, if the exact date is unknown) the defective corporate action was purported to have been taken.
(3) “Defective corporate action” means (i) any corporate action purportedly taken that is, and at the time such corporate action was purportedly taken would have been, within the power of the corporation, but is void or voidable due to a failure of authorization, and (ii) an overissue.
(4) “Failure of authorization” means the failure to authorize, approve, or otherwise effect a corporate action in compliance with the provisions of this chapter, the certificate of incorporation or bylaws, a corporate resolution, or any plan or agreement to which the corporation is a party, if and to the extent such failure would render such corporate action void or voidable.
(5) “Overissue” means the purported issuance of:
(i) stock of a class or series in excess of the number of shares of stock of a class or series the corporation has the power to issue under Section 10A-2A-6.01 at the time of such issuance; or
(ii) stock of any class or series that is not then authorized for issuance by the certificate of incorporation.
(6) “Putative stock” means the stock of any class or series (including stock issued upon exercise of rights, options, warrants, or other securities convertible into stock of the corporation, or interests with respect to such stock) that was created or issued as a result of a defective corporate action, that (i) but for any failure of authorization would constitute valid stock, or (ii) cannot be determined by the board of directors to be valid stock.
(7) “Valid stock” means the stock of any class or series that has been duly authorized and validly issued in accordance with this chapter, including as a result of ratification or validation under this article.
(8) “Validation effective time” with respect to any defective corporate action ratified under this article means the later of:
(i) the time at which the ratification of the defective corporate action is approved by the stockholders, or if approval of stockholders is not required, the time at which the notice required by Section 10A-2A-1.49 becomes effective in accordance with Section 10A-2A-1.41; and
(ii) the time at which any certificate of validation filed in accordance with Section 10A-2A-1.51 becomes effective.
The validation effective time shall not be affected by the filing or pendency of a judicial proceeding under Section 10A-2A-1.52 or otherwise, unless otherwise ordered by the court.
(Act 2019-94, §1.)
(a) A defective corporate action shall not be void or voidable if ratified in accordance with Section 10A-2A-1.47 or validated in accordance with Section 10A-2A-1.52.
(b) Ratification under Section 10A-2A-1.47 or validation under Section 10A-2A-1.52 shall not be deemed to be the exclusive means of ratifying or validating any defective corporate action, and the absence or failure of ratification in accordance with this article shall not, of itself, affect the validity or effectiveness of any corporate action properly ratified under common law or otherwise, nor shall it create a presumption that any such corporate action is or was a defective corporate action or void or voidable.
(c) In the case of an overissue, putative stock shall be valid stock effective as of the date originally issued or purportedly issued upon:
(1) the effectiveness under this article and under Article 10 of an amendment to the certificate of incorporation authorizing, designating, or creating such stock; or
(2) the effectiveness of any other corporate action under this article ratifying the authorization, designation, or creation of such stock.
(Act 2019-94, §1.)
(a) To ratify a defective corporate action under this section (other than the ratification of an election of the initial board of directors under subsection (b)), the board of directors shall take action ratifying the action in accordance with Section 10A-2A-1.48, stating:
(1) the defective corporate action to be ratified and, if the defective corporate action involved the issuance of putative stock, the number and type of shares of putative stock purportedly issued;
(2) the date of the defective corporate action;
(3) the nature of the failure of authorization with respect to the defective corporate action to be ratified; and
(4) that the board of directors approves the ratification of the defective corporate action.
(b) In the event that a defective corporate action to be ratified relates to the election of the initial board of directors of the corporation under Section 10A-2A-2.04(a)(2), a majority of the persons who, at the time of the ratification, are exercising the powers of directors may take an action stating:
(1) the name of the person or persons who first took action in the name of the corporation as the initial board of directors of the corporation;
(2) the earlier of the date on which such persons first took such action or were purported to have been elected as the initial board of directors; and
(3) that the ratification of the election of such person or persons as the initial board of directors is approved.
(c) If any provision of this chapter, the certificate of incorporation or bylaws, any corporate resolution, or any plan or agreement to which the corporation is a party in effect at the time action under subsection (a) is taken requires stockholder approval or would have required stockholder approval at the date of the occurrence of the defective corporate action, the ratification of the defective corporate action approved in the action taken by the directors under subsection (a) shall be submitted to the stockholders for approval in accordance with Section 10A-2A-1.48.
(d) Unless otherwise provided in the action taken by the board of directors under subsection (a), after the action by the board of directors has been taken and, if required, approved by the stockholders, the board of directors may abandon the ratification at any time before the validation effective time without further action of the stockholders.
(Act 2019-94, §1.)
(a) The quorum and voting requirements applicable to a ratifying action by the board of directors under Section 10A-2A-1.47(a) shall be the quorum and voting requirements applicable to the corporate action proposed to be ratified at the time the ratifying action is taken.
(b) If the ratification of the defective corporate action requires approval by the stockholders under Section 10A-2A-1.47(c), and if the approval is to be given at a meeting, the corporation shall notify each holder of valid and putative stock, regardless of whether entitled to vote of (i) the date of the action by the board of directors under Section 10A-2A-1.47(a), which shall be the record date, and (ii) the date of the occurrence of the defective corporate action, provided that notice shall not be required to be given to holders of valid or putative stock whose identities or addresses for notice cannot be determined from the records of the corporation. The notice must state that the purpose, or one of the purposes, of the meeting, is to consider ratification of a defective corporate action and must be accompanied by (i) either a copy of the action taken by the board of directors in accordance with Section 10A-2A-1.47(a) or the information required by Section 10A-2A-1.47(a)(1) through (a)(4), and (ii) a statement that any claim that the ratification of the defective corporate action and any putative stock issued as a result of the defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought within 120 days from the applicable validation effective time.
(c) Except as provided in subsection (d) with respect to the voting requirements to ratify the election of a director, the quorum and voting requirements applicable to the approval by the stockholders required by Section 10A-2A-1.47(c) shall be the quorum and voting requirements applicable to the corporate action proposed to be ratified at the time of the stockholder approval.
(d) The approval by stockholders to ratify the election of a director requires that the votes cast within the voting group favoring the ratification exceed the votes cast opposing the ratification of the election at a meeting at which a quorum is present.
(e) Putative stock on the date of the action by the board of directors under Section 10A-2A-1.47(a) (and without giving effect to any ratification of putative stock that becomes effective as a result of the vote) shall neither be entitled to vote nor counted for quorum purposes in any vote to approve the ratification of any defective corporate action.
(f) If the approval under this section of putative stock would result in an overissue, in addition to the approval required by Section 10A-2A-1.47, approval of an amendment to the certificate of incorporation under Article 10 to increase the number of shares of stock of an authorized class or series or to authorize the creation of a class or series of stock so there would be no overissue shall also be required.
(Act 2019-94, §1; Act 2024-413, §1.)
(a) Unless stockholder approval is required under Section 10A-2A-1.47(c), prompt notice of an action taken under Section 10A-2A-1.47 shall be given to each holder of valid and putative stock, regardless of whether entitled to vote, as of (i) the date of such action by the board of directors, and (ii) the date of the defective corporate action ratified, provided that notice shall not be required to be given to holders of valid and putative stock whose identities or addresses for notice cannot be determined from the records of the corporation.
(b) The notice must contain (i) either a copy of the action taken by the board of directors in accordance with Section 10A-2A-1.47(a) or (b) or the information required by Section 10A-2A-1.47(a)(1) through (a)(4) or Section 10A-2A-1.47(b)(1) through (b)(3), as applicable, and (ii) a statement that any claim that the ratification of the defective corporate action and any putative stock issued as a result of such defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought within 120 days from the applicable validation effective time.
(c) No notice under this section is required with respect to any action required to be submitted to stockholders for approval under Section 10A-2A-1.47(c) if notice is given in accordance with Section 10A-2A-1.48(b).
(d) A notice required by this section may be given in any manner permitted by Section 10A-2A-1.41 and, for any corporation subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, may be given by means of a filing or furnishing of such notice with the United States Securities and Exchange Commission.
(Act 2019-94, §1.)
From and after the validation effective time, and without regard to the 120-day period during which a claim may be brought under Section 10A-2A-1.52:
(a) Each defective corporate action ratified in accordance with Section 10A-2A-1.47 shall not be void or voidable as a result of the failure of authorization identified in the action taken under Section 10A-2A-1.47(a) or (b) and shall be deemed a valid corporate action effective as of the date of the defective corporate action;
(b) The issuance of each share of putative stock or fraction of a share of putative stock purportedly issued pursuant to a defective corporate action identified in the action taken under Section 10A-2A-1.47 shall not be void or voidable, and each such share of putative stock or fraction of a share of putative stock shall be deemed to be an identical share of stock or fraction of a valid share of stock as of the time it was purportedly issued; and
(c) Any corporate action taken subsequent to the defective corporate action ratified in accordance with this Division D of Article 1 in reliance on such defective corporate action having been validly effected and any subsequent defective corporate action resulting directly or indirectly from such original defective corporate action shall be valid as of the time taken.
(Act 2019-94, §1.)
(a) If the defective corporate action ratified under this Division D of Article 1 would have required under any other section of this chapter a filing instrument to be delivered to a filing officer for filing and either (i) the filing instrument requires any change to give effect to the defective corporate action in accordance with this Division D of Article 1 (including any change to the date and time of the effectiveness of the filing instrument) or (ii) a filing instrument under any other section of this chapter was not previously delivered to a filing officer for filing in respect of the defective corporate action, then, in lieu of a filing instrument otherwise required by this chapter, the corporation shall deliver a certificate of validation to the appropriate filing officer for filing in accordance with this section, and that certificate of validation shall serve to amend or substitute for any other filing instrument with respect to the defective corporate action required by this chapter.
(b) The certificate of validation must set forth:
(1) the name of the corporation;
(2) the unique identifying number or other designation as assigned by the Secretary of State;
(3) a statement that the defective corporate action was ratified in accordance with Section 10A-2A-1.47, including the date on which the board of directors ratified that defective corporate action and the date, if any, on which the stockholders approved the ratification of that defective corporate action; and
(4) the information required by subsection (c).
(c) The certificate of validation must also contain the following information:
(1) if a filing instrument was previously delivered to a filing officer for filing in respect of the defective corporate action and that filing instrument requires any change to give effect to the ratification of that defective corporate action in accordance with Section 10A-2A-1.47, the certificate of validation must set forth (i) the name, title, and filing date of the filing instrument previously delivered to a filing officer for filing and any certificate of correction to that filing instrument, (ii) a statement that a filing instrument containing all of the information required to be included under the applicable section or sections of this chapter to give effect to that defective corporate action is attached as an exhibit to the certificate of validation, and (iii) the date and time that filing instrument is deemed to have become effective; or
(2) if a filing instrument was not previously delivered to a filing officer for filing in respect of the defective corporate action and the defective corporate action ratified under Section 10A-2A-1.47 would have required a filing instrument under any other section of this chapter, the certificate of validation must set forth (i) a statement that a filing instrument containing all of the information required to be included under the applicable section or sections of this chapter to give effect to that defective corporate action is attached as an exhibit to the certificate of validation, and (ii) the date and time that filing instrument is deemed to have become effective.
(Act 2019-94, §1; Act 2023-503, §3; Act 2024-413, §1.)
(a) Upon application by the corporation, any successor entity to the corporation, a director of the corporation, any stockholder, beneficial stockholder or unrestricted voting trust beneficial owner of the corporation, including any stockholder, beneficial stockholder or unrestricted voting trust beneficial owner as of the date of the defective corporate action ratified under Section 10A-2A-1.47, or any other person claiming to be substantially and adversely affected by a ratification under Section 10A-2A-1.47, the designated court, and if none, the circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the corporation’s most recent registered office, is located, may:
(1) determine the validity and effectiveness of any corporate action or defective corporate action;
(2) determine the validity and effectiveness of any ratification under Section 10A-2A-1.47;
(3) determine the validity of any putative stock; and
(4) modify or waive any of the procedures specified in Section 10A-2A-1.47 or Section 10A-2A-1.48 to ratify a defective corporate action.
(b) In connection with an action under this section, the court may make such findings or orders, and take into account any factors or considerations, regarding such matters as it deems proper under the circumstances.
(c) Service of process of the application under subsection (a) on the corporation may be made in any manner provided by statute of this state or by rule of the applicable court for service on the corporation, and no other party need be joined in order for the court to adjudicate the matter. In an action filed by the corporation, the court may require notice of the action be provided to other persons specified by the court and permit such other persons to intervene in the action.
(d) Notwithstanding any other provision of this section or otherwise under applicable law, any action asserting that the ratification of any defective corporate action and any putative stock issued as a result of a defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought within 120 days of the validation effective time.
(Act 2019-94, §1; Act 2020-73, §7.)
Section 10A-1-3.04 shall not apply to this chapter. In order to incorporate a corporation, one or more incorporators must execute a certificate of incorporation and deliver it for filing to the Secretary of State.
(Act 2019-94, §1; Act 2021-299, §3.)
Section 10A-1-3.05 shall not apply to this chapter. Instead:
(a) The certificate of incorporation must set forth:
(1) a corporate name for the corporation that satisfies the requirements of Article 5 of Chapter 1;
(2) the number of shares of stock the corporation is authorized to issue;
(3) the street and mailing addresses of the corporation’s initial registered office, the county within this state in which the street and mailing address is located, and the name of the corporation’s initial registered agent at that office as required by Article 5 of Chapter 1; and
(4) the name and address of each incorporator.
(b) The certificate of incorporation may set forth:
(1) the names and addresses of the individuals who are to serve as the initial directors;
(2) provisions not inconsistent with law regarding:
(i) the purpose or purposes for which the corporation is organized;
(ii) managing the business and regulating the affairs of the corporation;
(iii) defining, limiting, and regulating the powers of the corporation, its board of directors, and stockholders;
(iv) a par value for authorized stock or classes of stock; or
(v) subject to subsection (f), a provision imposing personal liability for the debts of the corporation on its stockholders to a specified extent and upon specified conditions; otherwise, the stockholders of a corporation shall not be personally liable for the payment of the corporation’s debts, except as they may be liable by reason of their own conduct or acts;
(3) any provision that under this chapter is permitted to be set forth in the certificate of incorporation or required or permitted to be set forth in the bylaws;
(4) a provision eliminating or limiting the liability of a director or officer to the corporation or its stockholders for money damages for any action taken, or any failure to take any action, as a director or officer, except liability for (i) the amount of a financial benefit received by a director or officer to which the director or officer is not entitled; (ii) an intentional infliction of harm on the corporation or the stockholders; (iii) in the case of a director, a violation of Section 10A-2A-8.32; (iv) an intentional violation of criminal law; or (v) in the case of an officer, any claim by or in the right of the corporation;
(5) a provision permitting or making obligatory indemnification of a director for liability as defined in Section 10A-2A-8.50 to any person for any action taken, or any failure to take any action, as a director, except liability for (i) receipt of a financial benefit to which the director is not entitled, (ii) an intentional infliction of harm on the corporation or its stockholders, (iii) a violation of Section 10A-2A-8.32, or (iv) an intentional violation of criminal law; and
(6) a provision limiting or eliminating any duty of a director or any other person to offer the corporation the right to have or participate in any, or one or more classes or categories of, corporate opportunities, before the pursuit or taking of the corporate opportunity by the director or other person; provided that any application of that provision to an officer or a related person of that officer (i) also requires approval of that application by the board of directors, subsequent to the effective date of the provision, by action of qualified directors taken in compliance with the same procedures as are set forth in Section 10A-2A-8.60; and (ii) may be limited by the authorizing action of the board of directors.
(c) The certificate of incorporation need not set forth any of the corporate powers enumerated in Sections 10A-1-2.11, 10A-1-2.12, and 10A-1-2.13.
(d) Provisions of the certificate of incorporation may be made dependent upon facts objectively ascertainable outside the certificate of incorporation in accordance with Section 10A-2A-1.20(c).
(e) As used in this section, the term “control” or “controlled” has the meaning specified in Section 10A-2A-8.60 and the term “related person” means:
(i) the individual’s spouse;
(ii) a child, stepchild, grandchild, parent, stepparent, grandparent, sibling, stepsibling, half sibling, aunt, uncle, niece, or nephew (or spouse of any such person) of the individual or of the individual’s spouse;
(iii) a natural person living in the same home as the individual;
(iv) an entity (other than the corporation or an entity controlled by the corporation) controlled by the individual or any person specified above in this definition;
(v) a domestic or foreign:
(A) business or nonprofit corporation (other than the corporation or an entity controlled by the corporation) of which the individual is a director,
(B) unincorporated entity of which the individual is a general partner or a member of the governing authority, or
(C) individual, trust, or estate for whom or of which the individual is a trustee, guardian, personal representative, or like fiduciary, or
(vi) a person that is, or an entity that is, controlled by an employer of the individual.
(f) The certificate of incorporation may not contain any provision that would impose liability on a stockholder for the attorney’s fees or expenses of the corporation or any other party in connection with an internal corporate claim, as defined in Section 10A-2A-2.07(c), or in connection with a claim that a stockholder, acting in its capacity as a stockholder or in the right of the corporation, has brought in an action, suit, or proceeding described in Section 10A-2A-2.07(b).
(g) The certificate of incorporation is part of a binding contract between the corporation and the stockholders, subject to the provisions of this chapter.
(h) For purposes of subsection (b)(4) only, unless the certificate of incorporation otherwise provides, “officer” means an individual appointed or elected in accordance with Section 10A-2A-8.40 as (i) president, chief executive officer, chief operating officer, chief financial officer, chief legal officer, secretary, controller, treasurer, or chief accounting officer of the corporation; and (ii) any officer of the corporation designated by resolution of the board of directors as an “officer” for purposes of subsection (b)(4). The board of directors may, from time to time, by resolution determine that one or more of the officers designated in accordance with subsection (h)(ii) shall no longer be an officer for purposes of subsection (b)(4), but no such resolution shall be effective as to any such officer, or any act or omission of any such officer, prior to the adoption of the resolution.
(i) No provision in the certificate of incorporation pursuant to subsection (b)(4) shall eliminate or limit the liability of a director or officer for any act or omission occurring prior to the date when the provision in the certificate of incorporation becomes effective. Any amendment, repeal, or elimination of a provision in the certificate of incorporation pursuant to subsection (b)(4) shall not affect its application with respect to an act or omission by a director or officer occurring before the amendment, repeal, or elimination unless the provision in the certificate of incorporation provides otherwise at the time of the act or omission.
(Act 2019-94, §1; Act 2020-73, §7; Act 2021-299, §3; Act 2023-503, §3; Act 2024-413, §1; Act 2026-495, §1.)
All persons purporting to act as or on behalf of a corporation, knowing there was no incorporation under this chapter, are jointly and severally liable for all liabilities created while so acting.
(Act 2019-94, §1.)
(a) After incorporation:
(1) if initial directors are named in the certificate of incorporation, the initial directors shall hold an organizational meeting, at the call of a majority of the directors, to complete the organization of the corporation by appointing officers, adopting bylaws, and carrying on any other business brought before the meeting; or
(2) if initial directors are not named in the certificate of incorporation, the incorporator or incorporators shall hold an organizational meeting at the call of a majority of the incorporators:
(i) to elect initial directors and complete the organization of the corporation; or
(ii) to elect a board of directors who shall complete the organization of the corporation.
(b) Action required or permitted by this chapter to be taken by incorporators at an organizational meeting may be taken without a meeting if the action taken is evidenced by one or more written consents describing the action taken and signed by each incorporator.
(c) An organizational meeting may be held in or out of this state.
(Act 2019-94, §1.)
(a) The incorporators or board of directors of a corporation shall adopt initial bylaws for the corporation.
(b) The bylaws of a corporation may contain any provision that is not inconsistent with law or the certificate of incorporation.
(c) The bylaws may contain one or more of the provisions set forth in subsections (c)(1) and (c)(2) below, provided that no provision so adopted shall apply to elections for which any record date precedes its adoption.
(1) The bylaws may provide that if the corporation solicits proxies with respect to an election of directors, the corporation may be required, to the extent and subject to such procedures or conditions as may be provided in the bylaws, to include in its proxy solicitation materials (including any form of proxy it distributes), in addition to individuals nominated by the board of directors, one or more individuals nominated by a stockholder. Such procedures or conditions may include any of the following:
(i) a provision requiring a minimum record or beneficial ownership, or duration of ownership, of shares of the corporation’s capital stock, by the nominating stockholder, and defining beneficial ownership to take into account options or other rights in respect of or related to such stock;
(ii) a provision requiring the nominating stockholder to submit specified information concerning the stockholder and the stockholder’s nominees, including information concerning ownership by such persons of shares of the corporation’s capital stock, or options or other rights in respect of or related to such stock;
(iii) a provision conditioning eligibility to require inclusion in the corporation’s proxy solicitation materials upon the number or proportion of directors nominated by stockholders or whether the stockholder previously sought to require such inclusion;
(iv) a provision precluding nominations by any person if such person, any nominee of such person, or any affiliate or associate of such person or nominee, has acquired or publicly proposed to acquire shares constituting a specified percentage of the voting power of the corporation’s outstanding voting stock within a specified period before the election of directors;
(v) a provision requiring that the nominating stockholder undertake to indemnify the corporation in respect of any loss arising as a result of any false or misleading information or statement submitted by the nominating stockholder in connection with a nomination; and
(vi) any other lawful condition.
(2) The bylaws may provide for the reimbursement by the corporation of expenses incurred by a stockholder in soliciting proxies in connection with an election of directors, subject to such procedures or conditions as the bylaws may prescribe, including:
(i) conditioning eligibility for reimbursement upon the number or proportion of persons nominated by the stockholder seeking reimbursement or whether such stockholder previously sought reimbursement for similar expenses;
(ii) limitations on the amount of reimbursement based upon the proportion of votes cast in favor of one or more of the persons nominated by the stockholder seeking reimbursement, or upon the amount spent by the corporation in soliciting proxies in connection with the election;
(iii) limitations concerning elections of directors by cumulative voting pursuant to Section 10A-2A-7.28; or
(iv) any other lawful condition.
(d) Notwithstanding Section 10A-2A-10.20(b)(2), the stockholders in amending, repealing, or adopting a provision described in subsection (c) may not limit the authority of the board of directors to amend or repeal any condition or procedure set forth in or to add any procedure or condition to a provision to provide for a reasonable, practical, and orderly process.
(e) The bylaws are part of a binding contract between the corporation and the stockholders, subject to the provisions of this chapter.
(Act 2019-94, §1; Act 2020-73, §7; Act 2026-495, §1.)
(a) Unless the certificate of incorporation provides otherwise, bylaws may be adopted to be effective only in an emergency defined in subsection (d). The emergency bylaws, which are subject to amendment or repeal by the stockholders, may make all provisions necessary for managing the corporation during the emergency, including:
(1) procedures for calling a meeting of the board of directors;
(2) quorum requirements for the meeting; and
(3) designation of additional or substitute directors.
(b) All provisions of the regular bylaws not inconsistent with the emergency bylaws remain effective during the emergency. The emergency bylaws are not effective after the emergency ends.
(c) Corporate action taken in good faith in accordance with the emergency bylaws:
(1) binds the corporation; and
(2) may not be used to impose liability on a director, officer, employee, or agent of the corporation.
(d) An emergency exists for purposes of this section if a quorum of the board of directors cannot readily be assembled because of some catastrophic event.
(Act 2019-94, §1; Act 2023-503, §3.)
(a) The certificate of incorporation or the bylaws may require, consistent with applicable jurisdictional requirements, that any or all internal corporate claims shall be brought exclusively in any specified court or courts of this state and, if so specified, in any additional courts in this state or in any other jurisdictions with which the corporation has a reasonable relationship and no provision of the certificate of incorporation or the bylaws may prohibit bringing those claims in the courts of this state or require those claims to be determined by arbitration.
(b) With respect to claims that are not internal corporate claims, the certificate of incorporation or bylaws may require stockholders, when acting in their capacity as stockholders or in the right of the corporation, to bring any or all such claims only in any specified court or courts of this state and, if so specified, in any additional courts in this state or in any other jurisdictions with which the corporation has a reasonable relationship, if those claims relate to the business of the corporation, the conduct of its affairs, or the rights or powers of the corporation or its stockholders, directors, or officers; provided that such requirement is consistent with applicable jurisdictional requirements and allows a stockholder to bring such claims in at least one court in this state that has jurisdiction over those claims.
(c) “Internal corporate claim” means, for the purposes of this section, any claim, action, suit, or proceeding (i) that is based upon a violation of a duty under the laws of this state by a current or former director, officer, or stockholder in their capacities as such, (ii) that is a derivative action or proceeding brought on behalf of the corporation, (iii) that arises from, is pursuant to, or seeks to interpret, apply, enforce, or determine the validity of, any provision of this chapter, the certificate of incorporation, the bylaws, or any agreement entered into pursuant to Sections 10A-2A-7.30, 10A-2A-7.31, or 10A-2A-7.32 to which the corporation is a party or a stated beneficiary thereof, or (iv) that is governed by the internal affairs doctrine that is not included in (i) through (iii) above.
(d) This section does not prohibit any corporation from consenting, or require any corporation to consent, to any alternative forum in any instance.
(Act 2019-94, §1; Act 2026-495, §1.)
(a) Every corporation incorporated under this chapter has the purpose of engaging in any lawful business unless a more limited purpose is set forth in the certificate of incorporation.
(b) A corporation engaging in a business that is subject to regulation under another statute of this state may incorporate under this chapter only if permitted by, and subject to all limitations of, the other statute.
(Act 2019-94, §1.)
Unless its certificate of incorporation provides otherwise, every corporation has perpetual duration and succession in its corporate name and has the same powers as an individual to do all things necessary or convenient to carry out its business and affairs, including all entity powers provided in Section 10A-1-2.11, Section 10A-1-2.12, and Section 10A-1-2.13.
(Act 2019-94, §1.)
(a) In anticipation of or during an emergency defined in subsection (d), the board of directors of a corporation may:
(1) modify lines of succession to accommodate the incapacity of any director, officer, employee, or agent; and
(2) relocate the principal office, designate alternative principal offices or regional offices, or authorize the officers to do so.
(b) During an emergency defined in subsection (d), unless emergency bylaws provide otherwise:
(1) notice of a meeting of the board of directors need be given only to those directors whom it is practicable to reach and may be given in any practicable manner; and
(2) one or more officers of the corporation present at a meeting of the board of directors may be deemed to be directors for the meeting, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum.
(c) Corporate action taken in good faith during an emergency under this section to further the ordinary business affairs of the corporation:
(1) binds the corporation; and
(2) may not be used to impose liability on a director, officer, employee, or agent.
(d) An emergency exists for purposes of this section if a quorum of the board of directors cannot readily be assembled because of some catastrophic event.
(Act 2019-94, §1.)
(a) Except as provided in subsection (b), the validity of corporate action may not be challenged on the ground that the corporation lacks or lacked power to act.
(b) A corporation’s power to act may be challenged:
(1) in a proceeding by a stockholder against the corporation to enjoin the act;
(2) in a proceeding by the corporation, directly, derivatively, or through a receiver, trustee, or other legal representative, against an incumbent or former director, officer, employee, or agent of the corporation; or
(3) in a proceeding by the Attorney General under Section 10A-2A-14.10.
(c) In a stockholder’s proceeding under subsection (b)(1) to enjoin an unauthorized corporate act, the court may enjoin or set aside the act, if equitable and if all affected persons are parties to the proceeding, and may award damages for loss (other than anticipated profits) suffered by the corporation or another party because of enjoining the unauthorized act.
(d) Proceedings under subsection (b) shall be brought in the designated court, and if none, in the circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the corporation’s most recent registered office is located.
(Act 2019-94, §1; Act 2020-73, §7.)
Action validly taken pursuant to one provision of this chapter shall not be deemed invalid solely because it is identical or similar in substance to an action that could have been taken pursuant to some other provision of this chapter but fails to satisfy one or more requirements prescribed by such other provision.
(Act 2025-281, §8.)
(a) The certificate of incorporation must set forth any classes of stock and series of stock within a class, and the number of shares of stock of each class and series, that the corporation is authorized to issue. If more than one class or series of stock is authorized, the certificate of incorporation must prescribe a distinguishing designation for each class or series and, before the issuance of stock of a class or series, describe the terms, including the preferences, rights, and limitations, of that class or series. Except to the extent varied as permitted by this section, all shares of stock of a class or series must have terms, including preferences, rights, and limitations, that are identical with those of other shares of stock of the same class or series.
(b) The certificate of incorporation must authorize:
(1) one or more classes or series of stock that together have full voting rights, and
(2) one or more classes or series of stock (which may be the same class, classes, or series as those with voting rights) that together are entitled to receive the net assets of the corporation upon dissolution.
(c) The certificate of incorporation may authorize one or more classes or series of stock that:
(1) have special, conditional, or limited voting rights, or no right to vote, except to the extent otherwise provided by this chapter;
(2) are redeemable or convertible as specified in the certificate of incorporation:
(i) at the option of the corporation, the stockholder, or another person or upon the occurrence of a specified event;
(ii) for cash, indebtedness, securities, or other property; and
(iii) at prices and in amounts specified or determined in accordance with a formula;
(3) entitle the holders to distributions calculated in any manner, including dividends that may be cumulative, noncumulative, or partially cumulative; or
(4) have preference over any other class or series of stock with respect to distributions, including distributions upon the dissolution of the corporation.
(d) Terms of stock may be made dependent upon facts objectively ascertainable outside the certificate of incorporation in accordance with Section 10A-2A-1.20(c).
(e) Any of the terms of stock may vary among holders of the same class or series so long as those variations are expressly set forth in the certificate of incorporation.
(f) The description of the preferences, rights, and limitations of classes or series of stock in subsection (c) is not exhaustive.
(g) The certificate of incorporation may authorize the board of directors, without stockholder approval, to adopt resolutions, prepare and deliver certificates and certificates of designation to the Secretary of State, and take any other actions described in Section 10A-2A-6.02.
(Act 2019-94, §1.)
(a) When any corporation desires to issue any shares of stock of any class or of any series of any class of which the powers, designations, preferences, and relative, participating, optional, or other rights, if any, or the qualifications, limitations, or restrictions thereof, if any, shall not have been set forth in the certificate of incorporation or in any amendment thereto but shall be provided for in a resolution or resolutions adopted by the board of directors pursuant to authority expressly vested in it by the certificate of incorporation or any amendment thereto, a certificate of designations setting forth a copy of the board resolution or resolutions and the number of shares of stock of the class or series as to which the resolution or resolutions apply shall be executed and delivered to the Secretary of State for filing and shall become effective in accordance with Article 4 of Chapter 1. If the certificate of incorporation vests authority in the board of directors to determine the powers, designations, preferences, and relative, participating, optional, or other rights, if any, or the qualifications, limitations, or restrictions thereof, if any, of any class or series of stock, the board of directors is authorized to do so to the same extent permitted under Section 10A-2A-6.01.
(b) Unless otherwise provided in any resolution or resolutions described in subsection (a), the number of shares of stock of any class or series to which the resolution or resolutions apply may be increased (but not above the total number of authorized shares of the class) or decreased (but not below the number of shares thereof then outstanding) by a certificate likewise executed and delivered to the Secretary of State for filing setting forth a statement that a specified increase or decrease therein had been authorized and directed by a resolution or resolutions likewise adopted by the board of directors. In case the number of the authorized shares shall be decreased the number of shares so specified in the certificate shall resume the status which they had prior to the adoption of the first resolution or resolutions.
(c) When no shares of any authorized class or series are outstanding, either because none were issued or because no issued shares of any authorized class or series remain outstanding, a certificate setting forth a resolution or resolutions adopted by the board of directors that none of the authorized shares of that class or series are outstanding, and that none will be issued subject to the certificate of designations previously filed with respect to that class or series, may be executed and delivered to the Secretary of State for filing and shall become effective in accordance with Article 4 of Chapter 1, and when the certificate becomes effective, it shall have the effect of eliminating from the certificate of incorporation all matters set forth in the certificate of designations with respect to that class or series of stock.
(d) Unless otherwise provided in the certificate of incorporation, if no shares of stock have been issued of a class or series of stock established by a resolution of the board of directors, the voting powers, designations, preferences, and relative, participating, optional, or other rights, if any, or the qualifications, limitations, or restrictions thereof, may be amended by a resolution or resolutions adopted by the board of directors. A certificate which: (1) states that no shares of the class or series have been issued; (2) sets forth a copy of the resolution or resolutions; and (3) if the designation of the class or series is being changed, indicates the original designation and the new designation, shall be executed and delivered to the Secretary of State for filing and shall become effective in accordance with Article 4 of Chapter 1.
(e) When any certificate filed under this section becomes effective, it shall have the effect of amending the certificate of incorporation; except that neither the filing of that certificate nor the filing of a restated certificate of incorporation pursuant to Section 10A-2A-10.07 shall prohibit the board of directors from subsequently adopting resolutions as authorized by this section.
(Act 2019-94, §1.)
(a) A corporation may issue the number of shares of stock of each class or series authorized by the certificate of incorporation. Stock that is issued is outstanding stock until it is reacquired, redeemed, converted, or cancelled.
(b) The reacquisition, redemption, or conversion of outstanding stock is subject to the limitations of subsection (c) and to Section 10A-2A-6.40.
(c) At all times that stock of the corporation is outstanding, one or more shares of stock that together have full voting rights and one or more shares of stock that together are entitled to receive the net assets of the corporation upon dissolution must be outstanding.
(Act 2019-94, §1.)
(a) A corporation may issue fractions of a share of stock or in lieu of doing so may:
(1) pay in cash the value of fractions of a share of stock;
(2) issue scrip in certificated or uncertificated form entitling the holder to receive a full share of stock upon surrendering enough scrip to equal a full share of stock; or
(3) arrange for disposition of fractional stock by the holders of that stock.
(b) Each certificate representing scrip must be conspicuously labeled “scrip” and must contain the information required by Section 10A-1-3.42(c). A corporation shall not issue a certificate representing scrip in bearer form. Within a reasonable time after the issuance or transfer of scrip without certificate, the corporation shall comply with the notice requirements of Section 10A-1-3.45.
(c) The holder of a fractional share of stock is entitled to exercise the rights of a stockholder, including the rights to vote, to receive dividends, and to receive distributions upon dissolution. The holder of scrip is not entitled to any of these rights unless the scrip provides for them.
(d) The board of directors may authorize the issuance of scrip subject to any condition, including that:
(1) the scrip will become void if not exchanged for full stock before a specified date; and
(2) the stock for which the scrip is exchangeable may be sold and the proceeds paid to the scripholders.
(Act 2019-94, §1; Act 2022-124, §1.)
(a) A subscription for stock entered into before incorporation is irrevocable for six months unless the subscription agreement provides a longer or shorter period or all the subscribers agree to revocation.
(b) The board of directors may determine the payment terms of subscriptions for stock that were entered into before incorporation, unless the subscription agreement specifies them. A call for payment by the board of directors must be uniform so far as practicable as to all stock of the same class or series, unless the subscription agreement specifies otherwise.
(c) Stock issued pursuant to subscriptions entered into before incorporation are fully paid and nonassessable when the corporation receives the consideration specified in the subscription agreement.
(d) If a subscriber defaults in payment of cash or property under a subscription agreement entered into before incorporation, the corporation may collect the amount owed as any other debt. Alternatively, unless the subscription agreement provides otherwise, the corporation may rescind the agreement and may sell the stock if the debt remains unpaid for more than 20 days after the corporation delivers a written demand for payment to the subscriber.
(Act 2019-94, §1.)
(a) The powers granted in this section to the board of directors may be reserved to the stockholders by the certificate of incorporation.
(b) The board of directors may authorize stock to be issued for consideration consisting of a contribution. Stock may be issued in one or more transactions, in the numbers, at the time and for the consideration as set forth in a resolution of the board of directors.
(c) A resolution of the board of directors may delegate to a person or body, in addition to the board of directors, the authority to enter into one or more transactions to issue stock, and with respect to that transaction, shares of stock may be issued in the numbers, at the time and for the consideration as the person or body may determine; provided the resolution fixes (i) a maximum number of shares of stock that may be issued pursuant to the resolution, (ii) a time period during which the stock may be issued, and (iii) a minimum amount of consideration for which the stock may be issued. No resolution shall permit a person or body to issue stock to that person or body.
(d) Before the corporation issues stock pursuant to subsection (b) or subsection (c), the board of directors or the person or body authorized pursuant to subsection (c) shall determine that the consideration received or to be received for stock to be issued is adequate. That determination by the board of directors or the person or body authorized pursuant to subsection (c) is conclusive insofar as the adequacy of consideration for the issuance of stock relates to whether the stock is validly issued, fully paid, and nonassessable.
(e) Any provision of a resolution contemplated by subsection (b) or subsection (c) may be made dependent on facts ascertainable outside the resolution, which facts shall be determined in accordance with Section 10A-2A-1.20(c).
(f) When the corporation receives the consideration for which the board of directors authorized the issuance of stock, the stock issued therefor is fully paid and nonassessable.
(g) The corporation may place in escrow stock issued for a contract for future services or benefits or a promissory note, or make other arrangements to restrict the transfer of the stock, and may credit distributions in respect of the stock against its purchase price, until the services are performed, the benefits are received, or the note is paid. If the services are not performed, the benefits are not received, or the note is not paid, the stock escrowed or restricted and the distributions credited may be cancelled in whole or part.
(Act 2019-94, §1; Act 2024-413, §1.)
(a) A purchaser from a corporation of the corporation’s own stock is not liable to the corporation or its creditors with respect to the stock except to pay the consideration for which the stock was authorized to be issued or specified in the subscription agreement.
(b) A stockholder is not personally liable for any liabilities of the corporation (including liabilities arising from acts of the corporation) except to the extent provided in a provision of the certificate of incorporation permitted by Section 10A-2A-2.02.
(c) Except for controlling stockholders and control groups in a controlling stockholder transaction (as defined in Section 10A-2A-8.60), a stockholder, regardless of the stockholder’s relative beneficial ownership of shares or relative voting power, may, and shall be entitled to, exercise or withhold the voting power of such shares in the stockholder’s personal interest and without regard to any other person or interest.
(d) Except as set forth in subsection (e), a stockholder, in that person’s capacity as a stockholder and regardless of the stockholder’s relative beneficial ownership of shares or relative voting power, shall not have any duty to the corporation or any other stockholder.
(e) A controlling stockholder or a stockholder that is a member of a control group of a corporation, in such person’s capacity as a stockholder, has the duty to refrain from exerting undue influence over any director or officer of the corporation with the purpose and proximate effect of inducing a breach of fiduciary duty by a director or officer (i) for which breach the director or officer is liable pursuant to Section 10A-2A-8.31 and (ii) which breach directly relates to the negotiation, authorization, or approval by the board of directors, or a committee thereof, of a controlling stockholder transaction. The exercise or withholding of voting power by a controlling stockholder or a control group, or the indication or implication by a controlling stockholder or control group as to whether or to what extent voting power may be exercised or withheld, does not, by itself, constitute or indicate a breach of the duty imposed on the controlling stockholder or control group by this subsection.
(f) A controlling stockholder and a control group are presumed to have not breached the duty imposed by subsection (e) with respect to a controlling stockholder transaction if the controlling stockholder transaction has been authorized or approved in accordance with Section 10A-2A-8.60.
(g) A stockholder of a corporation is not individually liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in such person’s capacity as a stockholder under subsection (e) unless (i) the stockholder is a controlling stockholder or a member of a control group, (ii) the presumption established by subsection (f) has been rebutted, and (iii) it is proven that the stockholder’s act or failure to act constituted a breach of the stockholder’s duty imposed by subsection (e).
(Act 2019-94, §1; Act 2026-495, §1.)
(a) Unless the certificate of incorporation provides otherwise, stock may be issued pro rata and without consideration to the corporation’s stockholders or to the stockholders of one or more classes or series of stock. An issuance of stock under this subsection is a stock dividend.
(b) Stock of one class or series may not be issued as a stock dividend in respect of stock of another class or series unless (i) the certificate of incorporation so authorizes, (ii) a majority of the votes entitled to be cast by the class or series to be issued approve the issuance, or (iii) there is no outstanding stock of the class or series to be issued.
(c) The board of directors may fix the record date for determining stockholders entitled to a stock dividend, which date may not be retroactive. If the board of directors does not fix the record date for determining stockholders entitled to a stock dividend, the record date is the date the board of directors authorizes the stock dividend.
(Act 2019-94, §1.)
(a) A corporation may issue rights, options, or warrants for the purchase of stock or other securities of the corporation. The board of directors shall determine (i) the terms and conditions upon which the rights, options, or warrants are issued; and (ii) the terms, including the consideration for which the stock or other securities acquired from the corporation upon the exercise of any rights, options, or warrants are to be issued. The authorization by the board of directors for the corporation to issue rights, options, or warrants constitutes authorization of the issuance of the stock or other securities for which the rights, options, or warrants are exercisable.
(b) The board of directors may adopt a resolution to delegate to a person or body, in addition to the board of directors, the authority to enter into one or more transactions to issue rights, options, or warrants, and with respect to those transactions, the rights, options, or warrants may be issued in the numbers, at the time and for the consideration as the person or body may determine; provided that the resolution fixes (i) the maximum number of rights, options, or warrants, and the maximum number of shares of stock issuable upon exercise thereof, that may be issued pursuant to the resolution, (ii) a time period during which the rights, options, or warrants, and during which the stock issuable upon exercise thereof, may be issued, and (iii) a minimum amount of consideration (if any) for which the rights, options, or warrants may be issued and a minimum amount of consideration for the stock issuable upon exercise thereof. No resolution shall permit a person or body to issue rights, options, or warrants to that person or body.
(c) Any provision in a resolution contemplated by subsection (a) or subsection (b) may be made dependent on facts ascertainable outside the resolution, which facts shall be determined in accordance with Section 10A-2A-1.20(c).
(d) The terms and conditions of rights, options, or warrants may include restrictions or conditions that:
(1) preclude or limit the exercise, transfer, or receipt of rights, options, or warrants by any person or persons owning or offering to acquire a specified number or percentage of the outstanding stock or other securities of the corporation or by any transferee or transferees of that person or persons, or
(2) invalidate or void rights, options, or warrants held by that person or persons or any of that person’s transferee or transferees.
(e) The board of directors or the person or body authorized pursuant to subsection (b) may authorize one or more officers to (i) designate the recipients of rights, options, warrants, or other equity compensation awards that involve the issuance of stock and (ii) determine, within an amount and subject to any other limitations established by the board of directors, the person or body authorized pursuant to subsection (b) and, if applicable, the stockholders, the number of the rights, options, warrants, or other equity compensation awards and the terms of the rights, options, warrants, or awards to be received by the recipients, provided that an officer may not use that authority to designate himself or herself or any other persons as the board of directors may specify as a recipient of rights, options, warrants, or other equity compensation awards.
(Act 2019-94, §1; Act 2024-413, §1.)
(a) Stock may, but need not, be represented by certificates. Unless this chapter or another statute expressly provides otherwise, the rights and obligations of stockholders are identical regardless of whether their stock is represented by certificates.
(b) Each stock certificate must be signed by two officers designated in the certificate of incorporation or bylaws.
(c) Each certificate representing stock shall comply with Sections 10A-1-3.42, 10A-1-3.43(b), and 10A-1-3.44.
(d) No certificate representing stock shall be issued in bearer form.
(Act 2019-94, §1.)
(a) Unless the certificate of incorporation or bylaws provide otherwise, the board of directors of a corporation may authorize the issuance of some or all of the shares of stock of any or all of its classes or series without certificates. The authorization does not affect shares of stock already represented by certificates until they are surrendered to the corporation.
(b) Within a reasonable time after the issuance or transfer of shares of stock without certificates, the corporation shall comply with the notice requirements of Section 10A-1-3.45.
(Act 2019-94, §1.)
(a) The certificate of incorporation, the bylaws, an agreement among stockholders, or an agreement between stockholders and the corporation may impose restrictions on the transfer or registration of transfer of stock of the corporation. A restriction does not affect stock issued before the restriction was adopted unless the holders of the stock are parties to the restriction agreement or voted in favor of the restriction.
(b) A restriction on the transfer or registration of transfer of stock is valid and enforceable against the corporation, the holder, or a transferee of the holder if the restriction is authorized by this section and as provided in Section 10A-1-3.42, and its existence is noted conspicuously on the front or back of the certificate or is contained in the information required by Section 10A-1-3.45. Unless so noted or contained, a restriction is not enforceable against a person without knowledge of the restriction.
(c) A restriction on the transfer or registration of transfer of stock is authorized:
(1) to maintain the corporation’s status when it is dependent on the number or identity of its stockholders;
(2) to preserve exemptions under federal or state securities law; or
(3) for any other reasonable purpose.
(d) A restriction on the transfer or registration of transfer of stock may include a restriction that:
(1) obligates the stockholder first to offer the corporation or other persons (separately, consecutively, or simultaneously) an opportunity to acquire the restricted stock;
(2) obligates the corporation or other persons (separately, consecutively, or simultaneously) to acquire the restricted stock;
(3) requires the corporation, the holders of any class or series of its stock, or other persons to approve the transfer of the restricted stock, if the requirement is not manifestly unreasonable;
(4) prohibits the transfer or registration of the restricted stock to designated persons or classes of persons, if the prohibition is not manifestly unreasonable; or
(5) requires the corporation to refuse to transfer the stock.
(e) For purposes of this section, “stock” includes a security convertible into or carrying a right to subscribe for or acquire stock.
(Act 2019-94, §1.)
A corporation may pay the expenses of selling or underwriting its shares, and of organizing or reorganizing the corporation, from the consideration received for shares.
(Act 2019-94, §1.)
(a) The stockholders of a corporation do not have a preemptive right to acquire the corporation’s unissued stock except to the extent the certificate of incorporation so provides.
(b) A statement included in the certificate of incorporation that “the corporation elects to have preemptive rights” (or words of similar effect) means that the following principles apply except to the extent the certificate of incorporation expressly provides otherwise:
(1) The stockholders of the corporation have a preemptive right, granted on uniform terms and conditions prescribed by the board of directors to provide a fair and reasonable opportunity to exercise the right, to acquire proportional amounts of the corporation’s unissued stock upon the decision of the board of directors to issue them.
(2) A preemptive right may be waived by a stockholder. A waiver evidenced by a writing is irrevocable even though it is not supported by consideration.
(3) There is no preemptive right with respect to:
(i) stock issued as compensation to directors, officers, employees, or agents of the corporation, its subsidiaries, or affiliates;
(ii) stock issued to satisfy conversion or option rights created to provide compensation to directors, officers, employees, or agents of the corporation, its subsidiaries, or affiliates;
(iii) stock authorized in the certificate of incorporation that is issued within six months from the effective date of incorporation; or
(iv) stock sold otherwise than for cash.
(4) Holders of stock of any class or series without voting power but with preferential rights to distributions have no preemptive rights with respect to stock of any class or series.
(5) Holders of stock of any class or series with voting power but without preferential rights to distributions have no preemptive rights with respect to stock of any class or series with preferential rights to distributions unless the stock with preferential rights is convertible into or carry a right to subscribe for or acquire the stock without preferential rights.
(6) Stock subject to preemptive rights that is not acquired by stockholders may be issued to any person for a period of one year after being offered to stockholders at a consideration set by the board of directors that is not lower than the consideration set for the exercise of preemptive rights. An offer at a lower consideration or after the expiration of one year is subject to the stockholders’ preemptive rights.
(c) For purposes of this section, “stock” includes a security convertible into or carrying a right to subscribe for or acquire stock.
(Act 2019-94, §1.)
(a) A corporation may acquire its own stock, and, the stock so acquired shall constitute authorized but unissued stock, provided, however, that:
(1) the certificate of incorporation may provide that the acquired stock shall constitute authorized, issued, but not outstanding stock;
(2) the certificate of incorporation may prohibit the reissue of the acquired stock, in which case the number of authorized shares of stock is reduced by the number of shares of stock acquired; or
(3) if the certificate of incorporation does not (i) provide that the acquired stock shall constitute authorized but unissued stock, (ii) prohibit the reissuance of the acquired stock, or (iii) provide that the acquired stock shall constitute authorized, issued, but not outstanding stock, then the board of directors may determine, at or prior to the time of the acquisition, that the acquired stock will constitute authorized, issued, but not outstanding stock.
(b) If the board of directors has determined that any acquired stock was to be authorized, issued, but not outstanding in accordance with subsection (a)(3), then the board of directors may thereafter determine that the acquired stock shall be converted to stock that is authorized but not issued.
(Act 2019-94, §1; Act 2024-413, §1.)
(a) The board of directors may authorize and the corporation may make distributions to its stockholders subject to restriction by the certificate of incorporation and the limitation in subsection (c).
(b) The board of directors may fix the record date for determining stockholders entitled to a distribution, which date may not be retroactive. If the board of directors does not fix a record date for determining stockholders entitled to a distribution (other than one involving a purchase, redemption, or other acquisition of the corporation’s stock), the record date is the date the board of directors authorizes the distribution.
(c) No distribution may be made if, after giving it effect:
(1) the corporation would not be able to pay its debts as they become due in the usual course of business; or
(2) the corporation’s total assets would be less than the sum of its total liabilities plus (unless the certificate of incorporation permits otherwise) the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights are superior to those receiving the distribution.
(d) The board of directors may base a determination that a distribution is not prohibited under subsection (c) either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.
(e) Except as provided in subsection (g), the effect of a distribution under subsection (c) is measured:
(1) in the case of distribution by purchase, redemption, or other acquisition of the corporation’s stock, as of the earlier of (i) the date cash or other property is transferred or debt to a stockholder is incurred by the corporation or (ii) the date the stockholder ceases to be a stockholder with respect to the acquired stock;
(2) in the case of any other distribution of indebtedness, as of the date the indebtedness is distributed; and
(3) in all other cases, as of (i) the date the distribution is authorized if the payment occurs within 120 days after the date of authorization or (ii) the date the payment is made if it occurs more than 120 days after the date of authorization.
(f) A corporation’s indebtedness to a stockholder incurred by reason of a distribution made in accordance with this section is at parity with the corporation’s indebtedness to its general, unsecured creditors except to the extent subordinated by agreement.
(g) Indebtedness of a corporation, including indebtedness issued as a distribution, is not considered a liability for purposes of determinations under subsection (c) if its terms provide that payment of principal and interest are made only if and to the extent that payment of a distribution to stockholders could then be made under this section. If the indebtedness is issued as a distribution, each payment of principal or interest is treated as a distribution, the effect of which is measured on the date the payment is actually made.
(h) This section shall not apply to distributions in liquidation under Article 14.
(Act 2019-94, §1.)
(a) Unless directors are elected by written consent in lieu of an annual meeting as permitted by Section 10A-2A-7.04, a corporation shall hold a meeting of stockholders annually at a time stated in or fixed in accordance with the certificate of incorporation or bylaws at which directors shall be elected.
(b) Unless the board of directors determines to hold the meeting solely by means of remote communication in accordance with Section 10A-2A-7.09(c), annual meetings may be held (i) in or out of this state at the place stated in or fixed in accordance with the certificate of incorporation or bylaws or (ii) if no place is stated in or fixed in accordance with the certificate of incorporation or bylaws, at the corporation’s principal office.
(c) The failure to hold an annual meeting at the time stated in or fixed in accordance with a corporation’s certificate of incorporation or bylaws does not affect the validity of any corporate action.
(Act 2019-94, §1.)
(a) Special meetings of the stockholders may be called by the board of directors or by such person or persons as may be authorized by the certificate of incorporation or by the bylaws.
(b) In the event that the certificate of incorporation or bylaws allow stockholders to demand a special meeting of the stockholders, then if not otherwise fixed under Section 10A-2A-7.03 or Section 10A-2A-7.07, the record date for determining stockholders entitled to demand a special meeting shall be the first date on which a signed stockholder demand is delivered to the corporation. No written demand for a special meeting shall be effective unless, within 60 days of the earliest date on which the demand delivered to the corporation as allowed by the certificate of incorporation or bylaws was signed, written demands signed by stockholders holding at least the percentage of votes specified in or fixed in accordance with the certificate of incorporation or bylaws have been delivered to the corporation.
(c) Unless the board of directors determines to hold the meeting solely by means of remote participation in accordance with Section 10A-2A-7.09(c), special meetings of stockholders may be held (i) in or out of this state at the place stated in or fixed in accordance with the certificate of incorporation or bylaws or (ii) if no place is stated in or fixed in accordance with the certificate of incorporation or bylaws, at the corporation’s principal office.
(d) Only business within the purpose or purposes described in the meeting notice required by Section 10A-2A-7.05(c) may be conducted at a special meeting of stockholders.
(Act 2019-94, §1.)
(a) The designated court, and if none, the circuit court for the county in which the corporation’s principal office is located in this state, and, if none in this state, the circuit court for the county in which the corporation’s most recent registered office is located may summarily order a meeting to be held:
(1) on application of any stockholder of the corporation entitled to participate in an annual meeting if an annual meeting was not held or action by written consent in lieu of an annual meeting did not become effective within the earlier of 12 months after the end of the corporation’s fiscal year or 15 months after its last annual meeting; or
(2) on application of one or more stockholders who signed a demand for a special meeting valid under Section 10A-2A-7.02, if:
(i) notice of the special meeting was not given within 30 days after the first day on which the requisite number of demands have been delivered to the corporation; or
(ii) the special meeting was not held in accordance with the notice.
(b) The court may fix the time and place of the meeting, determine the stock entitled to participate in the meeting, specify a record date or dates for determining stockholders entitled to notice of and to vote at the meeting, prescribe the form and content of the meeting notice, fix the quorum required for specific matters to be considered at the meeting (or direct that the stock represented at the meeting constitute a quorum for action on those matters), and enter other orders necessary to accomplish the purpose or purposes of the meeting.
(c) For purposes of subsection (a)(1), “stockholder” means a record stockholder, a beneficial stockholder, and an unrestricted voting trust beneficial owner.
(Act 2019-94, §1; Act 2020-73, §7.)
(a) Unless otherwise provided in the certificate of incorporation, any action required or permitted by this chapter to be taken at any meeting of the stockholders may be taken without a meeting, and without prior notice, if one or more consents in writing setting forth the action so taken are signed by the holders of outstanding stock having not less than the minimum number of votes that would be required to authorize or take the action at a meeting at which all shares of stock entitled to vote on the action were present and voted; provided, however, that if a corporation’s certificate of incorporation authorizes stockholders to cumulate their votes when electing directors pursuant to Section 10A-2A-7.28, directors may not be elected by less than unanimous written consent. The action must be evidenced by one or more written consents describing the action taken, signed by the stockholders approving the action and delivered to the corporation for filing by the corporation with the minutes or corporate records.
(b) If not otherwise fixed under Section 10A-2A-7.07 and if prior action by the board of directors is not required respecting the action to be taken without a meeting, the record date for determining the stockholders entitled to take action without a meeting shall be the first date on which a written consent signed by a stockholder is delivered to the corporation. If not otherwise fixed under Section 10A-2A-7.07 and if prior action by the board of directors is required respecting the action to be taken without a meeting, the record date shall be the close of business on the day the resolution of the board of directors taking the prior action is adopted. No written consent of the stockholders shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest date on which a consent is delivered to the corporation as required by this section, written consents signed by sufficient stockholders to take the action have been delivered to the corporation. Any person signing a consent may provide, whether through instruction to an agent or otherwise, that the consent will be effective at a future time, including a time determined upon the happening of an event, occurring not later than 60 days after the instruction is given or such provision is made, if evidence of the instruction or provision is provided to the corporation. If a person signs a consent when that person is not a stockholder, then that person’s consent shall not be valid unless that person is a stockholder as of the record date for determining stockholders entitled to consent to the action. Unless a person’s written consent states that it is irrevocable, that written consent may be revoked by that person by a writing to that effect delivered to the corporation before unrevoked written consents sufficient in number to take the corporate action have been delivered to the corporation.
(c) A consent signed pursuant to this section has the effect of a vote taken at a meeting and may be described as such in any document. Unless the certificate of incorporation, bylaws or a resolution of the board of directors provides for a reasonable delay to permit tabulation of written consents, the action taken by written consent shall be effective when written consents signed by sufficient stockholders to take the action have been delivered to the corporation.
(d) If this chapter requires that notice of a proposed action be given to nonvoting stockholders and the action is to be taken by written consent of the voting stockholders, the corporation shall give its nonvoting stockholders written notice of the action not more than 10 days after (i) written consents sufficient to take the action have been delivered to the corporation, or (ii) any later date that tabulation of consents is completed pursuant to an authorization under subsection (c). The notice must reasonably describe the action taken and contain or be accompanied by the same material that, under any provision of this chapter, would have been required to be sent to nonvoting stockholders in a notice of a meeting at which the proposed action would have been submitted to the stockholders for action.
(e) If action is taken by less than unanimous written consent of the voting stockholders, the corporation shall give its nonconsenting voting stockholders written notice of the action not more than 10 days after (i) written consents sufficient to take the action have been delivered to the corporation, or (ii) any later date that tabulation of consents is completed pursuant to an authorization under subsection (c). The notice must reasonably describe the action taken and contain or be accompanied by the same material that, under any provision of this chapter, would have been required to be sent to voting stockholders in a notice of a meeting at which the action would have been submitted to the stockholders for action.
(f) The notice requirements in subsections (d) and (e) shall not delay the effectiveness of actions taken by written consent, and a failure to comply with those notice requirements shall not invalidate actions taken by written consent, provided that this subsection shall not be deemed to limit judicial power to fashion any appropriate remedy in favor of a stockholder adversely affected by a failure to give the notice within the required time period.
(Act 2019-94, §1; Act 2023-503, §3; Act 2024-413, §1.)
(a) A corporation shall notify stockholders of the place, if any, date, and time of each annual and special stockholders’ meeting no fewer than 10 nor more than 60 days before the meeting date. If the board of directors has authorized participation by means of remote communication pursuant to Section 10A-2A-7.09 for holders of any class or series of stock, the notice to the holders of that class or series of stock must describe the means of remote communication to be used. The notice must include the record date for determining the stockholders entitled to vote at the meeting, if that date is different from the record date for determining stockholders entitled to notice of the meeting. Unless this chapter or the certificate of incorporation requires otherwise, the corporation is required to give notice only to stockholders entitled to vote at the meeting as of the record date for determining the stockholders entitled to notice of the meeting.
(b) Unless this chapter or the certificate of incorporation requires otherwise, the notice of an annual meeting of stockholders need not include a description of the purpose or purposes for which the meeting is called.
(c) Notice of a special meeting of stockholders must include a description of the purpose or purposes for which the meeting is called.
(d) If not otherwise fixed under Section 10A-2A-7.03 or Section 10A-2A-7.07, the record date for determining stockholders entitled to notice of and to vote at an annual or special stockholders’ meeting is the earlier of (i) the date of the action by the board of directors calling the meeting of the stockholders or (ii) the day before the first notice is delivered to stockholders.
(e) Unless the certificate of incorporation or bylaws require otherwise, if an annual or special stockholders’ meeting is adjourned to a different place, if any, date, or time (including an adjournment taken to address a technical failure to convene or continue a meeting using remote communication pursuant to Section 10A-2A-7.09), notice need not be given of the new place, if any, date, or time if the new place, if any, date, or time is (i) announced at the meeting before adjournment or (ii) displayed, during the time scheduled for the meeting, on the same electronic network used to enable stockholders and proxy holders to participate in the meeting by means of remote communication. If a new record date for the adjourned meeting is or must be fixed under Section 10A-2A-7.07, however, notice of the adjourned meeting shall be given under this section to stockholders entitled to vote at the adjourned meeting as of the record date fixed for notice of the adjourned meeting.
(Act 2019-94, §1; Act 2024-413, §1.)
(a) A stockholder may waive any notice required by this chapter or the certificate of incorporation or bylaws, before or after the date and time stated in the notice. The waiver must be in writing, be signed by the stockholder entitled to the notice, and be delivered to the corporation for filing by the corporation with the minutes or corporate records.
(b) A stockholder’s attendance at a meeting:
(1) waives objection to lack of notice or defective notice of the meeting, unless the stockholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; and
(2) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the stockholder objects to considering the matter when it is presented.
(Act 2019-94, §1.)
(a) The certificate of incorporation or bylaws may fix or provide the manner of fixing the record date or dates for one or more voting groups to determine the stockholders entitled to notice of a stockholders’ meeting, to demand a special meeting, to vote, or to take any other action. If the certificate of incorporation or bylaws do not fix or provide for fixing a record date, the board of directors may fix the record date.
(b) A record date fixed under this section may not be more than 70 days before the meeting or action requiring a determination of stockholders and may not be retroactive.
(c) A determination of stockholders entitled to notice of or to vote at a stockholders’ meeting is effective for any adjournment of the meeting unless the board of directors fixes a new record date or dates, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.
(d) If a court orders a meeting adjourned to a date more than 120 days after the date fixed for the original meeting, it may provide that the original record date or dates continues in effect or it may fix a new record date or dates.
(e) The record dates for a stockholders’ meeting fixed by or in the manner provided in the certificate of incorporation or bylaws or by the board of directors shall be the record date for determining stockholders entitled both to notice of and to vote at the stockholders’ meeting, unless in the case of a record date fixed by the board of directors and to the extent not prohibited by the certificate of incorporation or bylaws, the board of directors, at the time it fixes the record date for stockholders entitled to notice of the meeting, fixes a later record date on or before the date of the meeting to determine the stockholders entitled to vote at the meeting.
(Act 2019-94, §1.)
Unless the certificate of incorporation or bylaws provide otherwise, a meeting of the stockholders shall be conducted as follows:
(a) At each meeting of stockholders, a chair shall preside. The chair shall be appointed by the board of directors.
(b) The board of directors shall determine the order of business and shall have the authority to establish rules for the conduct of the meeting.
(c) The chair of the meeting shall announce at the meeting when the polls close for each matter voted upon. If no announcement is made, the polls shall be deemed to have closed upon the final adjournment of the meeting. After the polls close, no ballots, proxies or votes nor any revocations or changes to ballots, proxies or votes may be accepted.
(Act 2019-94, §1.)
(a) Stockholders of any class or series of stock may participate in any meeting of stockholders by means of remote communication to the extent the board of directors authorizes participation for that class or series. Participation as a stockholder by means of remote communication shall be subject to guidelines and procedures as the board of directors adopts, and shall be in conformity with subsection (b).
(b) Stockholders participating in a stockholders’ meeting by means of remote communication shall be deemed present and may vote at that meeting if the corporation has implemented reasonable measures:
(1) to verify that each person participating remotely as a stockholder is a stockholder; and
(2) to provide stockholders participating remotely a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to communicate, and to read or hear the proceedings of the meeting, substantially concurrently with the proceedings.
(c) Unless the certificate of incorporation or bylaws require the meeting of stockholders to be held at a place, the board of directors may determine that any meeting of stockholders shall not be held at any place and shall instead be held solely by means of remote communication, but only if the corporation implements the measures specified in subsection (b).
(Act 2019-94, §1.)
(a) After fixing a record date for a meeting, a corporation shall prepare an alphabetical list of the names of all its stockholders who are entitled to notice of the stockholders’ meeting. If the board of directors fixes a different record date under Section 10A-2A-7.07(e) to determine the stockholders entitled to vote at the meeting, a corporation also shall prepare an alphabetical list of the names of all its stockholders who are entitled to vote at the meeting. Each list must be arranged by voting group (and within each voting group by class or series of stock) and contain the address of, and number and class or series of shares of stock held by, each stockholder, and if the notice or other communications regarding the meeting have been or will be sent by the corporation to a stockholder by electronic mail or other electronic transmission, the electronic mail or other electronic transmission address of that stockholder.
(b) The list of stockholders entitled to notice and to vote shall be available for inspection by any stockholder no later than the tenth day before each meeting of stockholders; provided, however, if the record date for determining the stockholders entitled to vote is less than 10 days before the meeting date, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date. The list shall be available (i) at the corporation’s principal office or at a place identified in the meeting notice in the city where the meeting will be held or (ii) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting. In the event that the corporation determines to make a list of stockholders available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation. A stockholder, or the stockholder’s agent or attorney, is entitled on written demand to inspect and, subject to the requirements of Section 10A-2A-16.02(c), to copy a list of stockholders, during regular business hours and at the stockholder’s expense, during the period it is available for inspection. A corporation may satisfy the stockholder’s right to copy a list of stockholders by furnishing a copy in the manner described in Section 10A-2A-16.03(b). A stockholder and the stockholder’s agent or attorney who inspects or is furnished a copy of a list of stockholders under this subsection (b) or who copies the list under this subsection (b) may use the information on that list only for purposes related to the meeting and its subject matter and must keep the information on that list confidential.
(c) If the corporation refuses to allow a stockholder, or the stockholder’s agent or attorney, to inspect a list of stockholders before the meeting or any adjournment (or copy a list as permitted by subsection (b)), the designated court, and if none, the circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the corporation’s most recent registered office is located, on application of the stockholder, may summarily order the inspection or copying at the corporation’s expense and may postpone the meeting for which the list was prepared until the inspection or copying is complete.
(d) Refusal or failure to prepare or make available a list of stockholders does not affect the validity of action taken at the meeting.
(e) The stock transfer records of the corporation shall be prima facie evidence as to who are the stockholders entitled to examine the stockholders’ list or transfer records or to vote at any meeting of stockholders.
(Act 2019-94, §1; Act 2020-73, §7; Act 2021-299, §3; Act 2023-503, §3.)
(a) Except as provided in subsections (b) and (d) or unless the certificate of incorporation provides otherwise, each outstanding share of stock, regardless of class or series, is entitled to one vote on each matter voted on at a stockholders’ meeting. Only stock is entitled to vote.
(b) Stock of a corporation is not entitled to vote if it is owned by or otherwise belongs to the corporation directly, or indirectly through an entity of which a majority of the voting power is held directly or indirectly by the corporation or which is otherwise controlled by the corporation.
(c) Stock held by the corporation in a fiduciary capacity for the benefit of any person is entitled to vote unless it is held for the benefit of, or otherwise belongs to, the corporation directly, or indirectly through an entity of which a majority of the voting power is held directly or indirectly by the corporation or which is otherwise controlled by the corporation.
(d) Redeemable stock is not entitled to vote after delivery of written notice of redemption is effective and a sum sufficient to redeem the stock has been deposited with a bank, trust company, or other financial institution under an irrevocable obligation to pay the holders the redemption price on surrender of the stock.
(e) For purposes of this section, “voting power” means the current power to vote in the election of directors of a corporation or to elect, select, or appoint governing persons of another entity.
(Act 2019-94, §1.)
(a) A stockholder may vote the stockholder’s stock in person or by proxy.
(b) A stockholder, or the stockholder’s agent or attorney-in-fact, may appoint a proxy to vote or otherwise act for the stockholder by signing an appointment form, or by an electronic transmission. An electronic transmission must contain or be accompanied by information from which the recipient can determine the date of the transmission and that the transmission was authorized by the sender or the sender’s agent or attorney-in-fact.
(c) An appointment of a proxy is effective when a signed appointment form or an electronic transmission of the appointment is received by the inspector of election or the officer or agent of the corporation authorized to count votes. An appointment is valid for the term provided in the appointment form, and, if no term is provided, is valid for 11 months unless the appointment is irrevocable under subsection (d).
(d) An appointment of a proxy is revocable unless the appointment form or electronic transmission states that it is irrevocable and the appointment is coupled with an interest. Appointments coupled with an interest include the appointment of:
(1) a pledgee;
(2) a person who purchased or agreed to purchase the stock;
(3) a creditor of the corporation who extended it credit under terms requiring the appointment;
(4) an employee of the corporation whose employment contract requires the appointment; or
(5) a party to a voting agreement created under Section 10A-2A-7.31.
(e) The death or incapacity of the stockholder appointing a proxy does not affect the right of the corporation to accept the proxy’s authority unless notice of the death or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises authority under the appointment.
(f) An appointment made irrevocable under subsection (d) is revoked when the interest with which it is coupled is extinguished.
(g) Unless it otherwise provides, an appointment made irrevocable under subsection (d) continues in effect after a transfer of the stock and a transferee takes subject to the appointment, except that a transferee for value of stock subject to an irrevocable appointment may revoke the appointment if the transferee did not know of its existence when acquiring the stock and the existence of the irrevocable appointment was not noted conspicuously on the certificate representing the stock or on the information statement for stock without certificates.
(h) Subject to Section 10A-2A-7.24 and to any express limitation on the proxy’s authority stated in the appointment form or electronic transmission, a corporation is entitled to accept the proxy’s vote or other action as that of the stockholder making the appointment.
(i) Nothing in this section shall be construed as limiting, or extending, authority granted under a durable power of attorney under Section 26-1-2 or Chapter 1A of Title 26, and any successor statute or statutes thereto.
(Act 2019-94, §1.)
(a) A corporation’s board of directors may establish a procedure under which a person on whose behalf stock is registered in the name of an intermediary or nominee may elect to be treated by the corporation as the record stockholder by filing with the corporation a beneficial ownership certificate. The terms, conditions, and limitations of this treatment shall be specified in the procedure. To the extent that person is treated under those procedures as having rights or privileges that the record stockholder otherwise would have, the record stockholder shall not have those rights or privileges.
(b) The procedure must specify:
(1) the types of intermediaries or nominees to which it applies;
(2) the rights or privileges that the corporation recognizes in a person with respect to whom a beneficial ownership certificate is filed;
(3) the manner in which the procedure is selected which must include that the beneficial ownership certificate be signed or assented to by or on behalf of the record stockholder and the person on whose behalf the stock is held;
(4) the information that must be provided when the procedure is selected;
(5) the period for which selection of the procedure is effective;
(6) requirements for notice to the corporation with respect to the arrangement; and
(7) the form and contents of the beneficial ownership certificate.
(c) The procedure may specify any other aspects of the rights and duties created by the filing of a beneficial ownership certificate.
(Act 2019-94, §1.)
(a) If the name signed on a vote, ballot, consent, waiver, stockholder demand, or proxy appointment corresponds to the name of a stockholder, the corporation, if acting in good faith, is entitled to accept the vote, ballot, consent, waiver, stockholder demand, or proxy appointment and give it effect as the act of the stockholder.
(b) If the name signed on a vote, ballot, consent, waiver, stockholder demand, or proxy appointment does not correspond to the name of its stockholder, the corporation, if acting in good faith, is nevertheless entitled to accept the vote, ballot, consent, waiver, stockholder demand, or proxy appointment and give it effect as the act of the stockholder if:
(1) the stockholder is an entity and the name signed purports to be that of an officer or agent of the entity;
(2) the name signed purports to be that of an administrator, executor, guardian, or conservator representing the stockholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, ballot, consent, waiver, stockholder demand, or proxy appointment;
(3) the name signed purports to be that of a receiver or trustee in bankruptcy of the stockholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, ballot, consent, waiver, stockholder demand, or proxy appointment;
(4) the name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the stockholder and, if the corporation requests, evidence acceptable to the corporation of the signatory’s authority to sign for the stockholder has been presented with respect to the vote, ballot, consent, waiver, stockholder demand, or proxy appointment; or
(5) two or more persons are the stockholder as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all the co-owners.
(c) The corporation is entitled to reject a vote, ballot, consent, waiver, stockholder demand, or proxy appointment if the person authorized to accept or reject that instrument, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory’s authority to sign for the stockholder.
(d) Neither the corporation or any person authorized by it, nor an inspector of election appointed under Section 10A-2A-7.29, that accepts or rejects a vote, ballot, consent, waiver, stockholder demand, or proxy appointment in good faith and in accordance with the standards of this Section 10A-2A-7.24 or Section 10A-2A-7.22(b) is liable in damages to the stockholder for the consequences of the acceptance or rejection.
(e) Corporate action based on the acceptance or rejection of a vote, ballot, consent, waiver, stockholder demand, or proxy appointment under this section is valid unless the designated court, and if none, the circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the corporation’s most recent registered office is located, determines otherwise.
(f) If an inspector of election has been appointed under Section 10A-2A-7.29, the inspector of election also has the authority to request information and make determinations under subsections (a), (b), and (c). Any determination made by the inspector of election under those subsections is controlling.
(Act 2019-94, §1; Act 2020-73, §7.)
(a) Stock entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares of stock exists with respect to that matter. Unless the certificate of incorporation provides otherwise, stock representing a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter. Whenever this chapter requires a particular quorum for a specified action, the certificate of incorporation may not provide for a lower quorum.
(b) Once a share of stock is represented for any purpose at a meeting, it is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be fixed for that adjourned meeting.
(c) If a quorum exists, action on a matter (other than the election of directors) by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the certificate of incorporation requires a greater number of affirmative votes.
(d) An amendment of the certificate of incorporation adding, changing, or deleting a quorum or voting requirement for a voting group greater than specified in subsection (a) or subsection (c) is governed by Section 10A-2A-7.27.
(e) The election of directors is governed by Section 10A-2A-7.28.
(f) Whenever a provision of this chapter provides for voting of classes or series as separate voting groups, the rules provided in Section 10A-2A-10.04(c) for amendments of the certificate of incorporation apply to that provision.
(Act 2019-94, §1.)
(a) If the certificate of incorporation or this chapter provides for voting by a single voting group on a matter, action on that matter is taken when voted upon by that voting group as provided in Section 10A-2A-7.25.
(b) If the certificate of incorporation or this chapter provides for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately as provided in Section 10A-2A-7.25. Action may be taken by different voting groups on a matter at different times.
(Act 2019-94, §1.)
An amendment to the certificate of incorporation that adds, changes, or deletes a quorum or voting requirement shall meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater.
(Act 2019-94, §1.)
(a) Unless otherwise provided in the certificate of incorporation, directors are elected by a plurality of the votes cast by the stock entitled to vote in the election at a meeting at which a quorum is present.
(b) Stockholders do not have a right to cumulate their votes for directors unless the certificate of incorporation so provides.
(c) A statement included in the certificate of incorporation that ”[all] [a designated voting group of] stockholders are entitled to cumulate their votes for directors” (or words of similar import) means that the stockholders designated are entitled to multiply the number of votes they are entitled to cast by the number of directors for whom they are entitled to vote and cast the product for a single candidate or distribute the product among two or more candidates.
(d) Stock otherwise entitled to vote cumulatively may not be voted cumulatively at a particular meeting unless:
(1) the meeting notice or proxy statement accompanying the notice states conspicuously that cumulative voting is authorized; or
(2) a stockholder who has the right to cumulate the stockholder’s votes gives notice to the corporation not less than 48 hours before the time set for the meeting of the stockholder’s intent to cumulate votes during the meeting, and if one stockholder gives this notice all other stockholders in the same voting group participating in the election are entitled to cumulate their votes without giving further notice.
(Act 2019-94, §1.)
(a) The corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of the inspector’s ability.
(b) The inspectors shall:
(1) Ascertain the number of shares of stock outstanding and the voting power of each;
(2) Determine the shares of stock represented at a meeting and the validity of proxies and ballots;
(3) Count all votes and ballots;
(4) Determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and
(5) Certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors.
(c) The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting. No ballot, proxies, or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the designated court, and if none, the circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the corporation’s most recent registered office is located, upon application by a stockholder shall determine otherwise.
(d) In determining the validity and counting of proxies and ballots, the inspectors shall be limited to an examination of the proxies, any envelopes submitted with those proxies, any information provided in accordance with Section 10A-2A-7.22, or any information provided pursuant to Section 10A-2A-7.09(b), ballots and the regular books and records of the corporation, except that the inspectors may consider other reliable information for the limited purpose of reconciling proxies and ballots submitted by or on behalf of banks, brokers, their nominees, or similar persons which represent more votes than the holder of a proxy is authorized by the record owner to cast or more votes than the stockholder holds of record. If the inspectors consider other reliable information for the limited purpose permitted herein, the inspectors at the time they make their certification pursuant to subsection (b)(5) of this section shall specify the precise information considered by them including the person or persons from whom they obtained the information, when the information was obtained, the means by which the information was obtained, and the basis for the inspectors’ belief that the information is accurate and reliable.
(e) Unless otherwise provided in the certificate of incorporation or bylaws, this section shall not apply to a corporation that does not have a class of voting stock that is:
(1) Listed on a national securities exchange;
(2) Authorized for quotation on an interdealer quotation system of a registered national securities association; or
(3) Held of record by more than 2,000 stockholders.
(Act 2019-94, §1; Act 2020-73, §7.)
(a) One or more stockholders may create a voting trust, conferring on a trustee the right to vote or otherwise act for them, by signing an agreement setting out the provisions of the trust (which may include anything consistent with its purpose) and transferring their stock to the trustee. When a voting trust agreement is signed, the trustee shall prepare a list of the names and addresses of all voting trust beneficial owners, together with the number and class of stock each transferred to the trust, and deliver copies of the list and agreement to the corporation at its principal office.
(b) A voting trust becomes effective on the date the first shares of stock subject to the trust are registered in the trustee’s name.
(c) Limits, if any, on the duration of a voting trust shall be as set forth in the voting trust. A voting trust that became effective when this chapter provided a 10-year limit on its duration remains governed by the provisions of this section concerning duration then in effect, unless the voting trust is amended to provide otherwise by unanimous agreement of the parties to the voting trust.
(Act 2019-94, §1.)
(a) Two or more stockholders may provide for the manner in which they will vote their stock by signing an agreement for that purpose. A voting agreement created under this section is not subject to the provisions of Section 10A-2A-7.30.
(b) A voting agreement created under this section is specifically enforceable.
(Act 2019-94, §1.)
(a) An agreement among the stockholders of a corporation that complies with this section is effective among the stockholders and the corporation even though it is inconsistent with one or more other provisions of this chapter in that it:
(1) eliminates the board of directors or restricts the discretion or powers of the board of directors;
(2) governs the authorization or making of distributions, regardless of whether they are in proportion to ownership of stock, subject to the limitations in Section 10A-2A-6.40;
(3) establishes who shall be directors or officers of the corporation, or their terms of office or manner of selection or removal;
(4) governs, in general or in regard to specific matters, the exercise or division of voting power by or between the stockholders and directors or by or among any of them, including use of weighted voting rights;
(5) establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any stockholder, director, officer, or employee of the corporation or among any of them;
(6) transfers to one or more stockholders or other persons all or part of the authority to exercise the corporate powers or to manage the business and affairs of the corporation, including the resolution of any issue about which there exists a deadlock among directors or stockholders;
(7) requires dissolution of the corporation at the request of one or more of the stockholders or upon the occurrence of a specified event or contingency; or
(8) otherwise governs the exercise of the corporate powers or the management of the business and affairs of the corporation or the relationship among the stockholders, the directors and the corporation, or among any of them, and is not contrary to public policy.
(b) An agreement authorized by this section shall be:
(1) as set forth (i) in the certificate of incorporation or bylaws and approved by all persons who are stockholders at the time of the agreement, or (ii) in a written agreement that is signed by all persons who are stockholders at the time of the agreement and is made known to the corporation; and
(2) subject to amendment only by all persons who are stockholders at the time of the amendment, unless the agreement provides otherwise.
(c) The existence of an agreement authorized by this section shall be noted conspicuously on the front or back of each certificate for outstanding stock or in the information required by Section 10A-1-3.45. If at the time of the agreement the corporation has stock outstanding represented by certificates, the corporation shall recall the outstanding certificates and issue substitute certificates that comply with this subsection. The failure to note the existence of the agreement as required by this subsection shall not affect the validity of the agreement or any action taken pursuant to it. Any purchaser of stock who, at the time of purchase, did not have knowledge of the existence of the agreement shall be entitled to rescission of the purchase. A purchaser shall be deemed to have knowledge of the existence of the agreement if its existence is noted on the certificate or if the stock is not represented by a certificate, the information required by Section 10A-1-3.45 is delivered to the purchaser at or before the time of purchase of the stock. An action to enforce the right of rescission authorized by this subsection shall be commenced within the earlier of 90 days after discovery of the existence of the agreement or two years after the time of purchase of the stock.
(d) If the agreement ceases to be effective for any reason, the board of directors may, if the agreement is contained or referred to in the corporation’s certificate of incorporation or bylaws, adopt an amendment to the certificate of incorporation or bylaws, without stockholder action, to delete the agreement and any references to it.
(e) An agreement authorized by this section that limits the discretion or powers of the board of directors shall relieve the directors of, and impose upon the person or persons in whom the discretion or powers are vested, liability for acts or omissions imposed by law on directors to the extent that the discretion or powers of the directors are limited by the agreement. An agreement authorized by this section that eliminates the board of directors shall impose on the person or persons in whom the discretion or powers of the directors are vested the liability for acts or omissions as are imposed by law on directors.
(f) The existence or performance of an agreement authorized by this section shall not be a ground for imposing personal liability on any stockholder for the acts or debts of the corporation even if the agreement or its performance treats the corporation as if it were a partnership or results in failure to observe the corporate formalities otherwise applicable to the matters governed by the agreement.
(g) Incorporators or subscribers for stock may act as stockholders with respect to an agreement authorized by this section if no stock has been issued when the agreement is made.
(h) Limits, if any, on the duration of an agreement authorized by this section must be set forth in the agreement.
(Act 2019-94, §1; Act 2023-503, §3.)
In this division:
(1) COURT means the designated court, and if none, the circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the corporation’s most recent registered office is located.
(2) DERIVATIVE ACTION means a civil suit in the right of a corporation or, to the extent provided in Section 10A-2A-7.48, in the right of a foreign corporation.
(3) STOCKHOLDER means a record stockholder, a beneficial stockholder, and an unrestricted voting trust beneficial owner.
(Act 2019-94, §1; Act 2020-73, §7; Act 2025-281, §2.)
A stockholder may commence or maintain a derivative action in the right of a corporation to enforce a right of the corporation by complying with this division.
(Act 2019-94, §1.)
A stockholder may commence or maintain a derivative action in the right of the corporation only if the stockholder:
(1) fairly and adequately represents the interests of the corporation in enforcing the right of the corporation; and
(2) either:
(A) was a stockholder of the corporation at the time of the act or omission of which the stockholder complains; or
(B) whose status as a stockholder devolved upon the person by operation of law from a person who was a stockholder at the time of the act or omission of which the stockholder complains.
(Act 2019-94, §1.)
A stockholder may commence a derivative action in the right of the corporation, if:
(a) the stockholder first makes a written demand upon the corporation requesting that it bring an action to enforce the right and the corporation does not bring the action within a reasonable time; or
(b) a demand under subsection (a) would be futile.
(Act 2019-94, §1.)
In a derivative action, the complaint must state with particularity:
(a) the date and content of plaintiff’s demand and the corporation’s response by the corporation to the demand; or
(b) why the demand should be excused as futile.
(Act 2019-94, §1.)
For the purpose of allowing the corporation time to undertake an inquiry into the allegations made in the demand or complaint commenced pursuant to this division, the court may stay any derivative action for the period the court deems appropriate.
(Act 2019-94, §1.)
A derivative action may not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to stockholders of the corporation in such manner as the court directs.
(Act 2019-94, §1.)
(a) Except as otherwise provided in subsection (b):
(1) any proceeds or other benefits of a derivative action, whether by judgment, compromise, or settlement, belong to the corporation and not to the derivative plaintiff; and
(2) if the derivative plaintiff receives any proceeds, the derivative plaintiff shall immediately remit them to the corporation.
(b) If a derivative action is successful in whole or in part, the court may award the plaintiff reasonable expenses, including reasonable attorney’s fees, from the recovery of the corporation.
(Act 2019-94, §1.)
In any derivative action in the right of a foreign corporation, the right of a person to commence or maintain a derivative action in the right of a foreign corporation, and any matters raised in the action covered by Sections 10A-2A-7.42 through 10A-2A-7.47, shall be governed by the law of the jurisdiction under which the foreign corporation was formed; except that any matters raised in the action covered by Sections 10A-2A-7.45, 10A-2A-7.46, and 10A-2A-7.47 shall be governed by the law of this state.
(Act 2019-94, §1.)
(a) Except as may be provided in an agreement authorized under Section 10A-2A-7.32, each corporation shall have a board of directors.
(b) Except as may be provided in an agreement authorized under Section 10A-2A-7.32, and subject to any limitation in the certificate of incorporation permitted by Section 10A-2A-2.02(b), all corporate powers shall be exercised by or under the authority of the board of directors, and the business and affairs of the corporation shall be managed by or under the direction, and subject to the oversight, of the board of directors.
(Act 2019-94, §1.)
(a) The certificate of incorporation or bylaws may prescribe qualifications for directors or for nominees for directors. Qualifications must be reasonable as applied to the corporation and be lawful.
(b) A requirement that is based on a past, prospective, or current action, or expression of opinion, by a nominee for director or a director that could limit the ability of a nominee for director or a director to discharge his or her duties as a director is not a permissible qualification under this section. Notwithstanding the foregoing, qualifications may include not being or having been subject to specified criminal, civil, or regulatory sanctions or not having been removed as a director by judicial action or for cause.
(c) A director shall be a natural person of the age of at least 19 years but need not be a resident of this state or a stockholder unless the certificate of incorporation or bylaws so prescribe.
(d) A qualification for nomination for director prescribed before a person’s nomination shall apply to that person at the time of nomination. A qualification for nomination for director prescribed after a person’s nomination shall not apply to that person with respect to that person’s nomination.
(e) A qualification for director prescribed before a director has been elected or appointed may apply only at the time an individual becomes a director or may apply during a director’s term. A qualification prescribed after a director has been elected or appointed shall not apply to that director before the end of that director’s term.
(Act 2019-94, §1.)
(a) A board of directors shall consist of one or more individuals, with the number specified in or fixed in accordance with the certificate of incorporation or bylaws.
(b) The number of directors may be increased or decreased from time to time by amendment to, or in the manner provided in, the certificate of incorporation or bylaws.
(c) Except as set forth in Section 10A-2A-2.04, directors are elected at the first annual stockholders’ meeting and at each annual stockholders’ meeting thereafter unless elected by written consent in lieu of an annual meeting as permitted by Section 10A-2A-7.04 or unless their terms are staggered under Section 10A-2A-8.06.
(Act 2019-94, §1.)
If the certificate of incorporation or action by the board of directors pursuant to Section 10A-2A-6.02 authorizes dividing the stock into classes or series, the certificate of incorporation may also authorize the election of all or a specified number of directors by the holders of one or more authorized classes or series of stock. A class or series (or multiple classes or series) of stock entitled to elect one or more directors is a separate voting group for purposes of the election of directors.
(Act 2019-94, §1.)
(a) The terms of the initial directors of a corporation expire at the first stockholders’ meeting at which directors are elected.
(b) The terms of all other directors expire at the next, or if their terms are staggered in accordance with Section 10A-2A-8.06, at the applicable second or third, annual stockholders’ meeting following their election, except to the extent (i) provided in Section 10A-2A-10.22 if a bylaw electing to be governed by that section is in effect, or (ii) a shorter term is specified in the certificate of incorporation in the event of a director nominee failing to receive a specified vote for election.
(c) A decrease in the number of directors does not shorten an incumbent director’s term.
(d) Except as set forth in the next sentence of this subsection, the term of a director elected to fill a vacancy expires at the next stockholders’ meeting at which directors are elected. The term of a director elected to fill a vacancy in a corporation, the directors of which have been divided into groups under Section 10A-2A-8.06, shall hold office until the next election of the group for which that group of directors has been chosen, and until their successors shall be elected and qualified.
(e) Except to the extent otherwise provided in the certificate of incorporation or under Section 10A-2A-10.22 if a bylaw electing to be governed by that section is in effect, despite the expiration of a director’s term, the director continues to serve until the director’s successor is elected and qualifies or there is a decrease in the number of directors.
(Act 2019-94, §1.)
The certificate of incorporation may provide for staggering the terms of directors by dividing the total number of directors into two or three groups, with each group containing half or one-third of the total, as near as may be practicable. In that event, the terms of directors in the first group expire at the first annual stockholders’ meeting after their election, the terms of the second group expire at the second annual stockholders’ meeting after their election, and the terms of the third group, if any, expire at the third annual stockholders’ meeting after their election. At each annual stockholders’ meeting held thereafter, directors shall be elected for a term of two years or three years, as the case may be, to succeed those whose terms expire.
(Act 2019-94, §1.)
(a) A director may resign at any time by delivering a written notice of resignation to the board of directors or its chair, to the secretary, or to the corporation.
(b) A resignation is effective as provided in Section 10A-2A-1.41(i) unless the resignation provides for a delayed effectiveness, including effectiveness determined upon a future event or events. A resignation that is conditioned upon failing to receive a specified vote for election as a director may provide that it is irrevocable.
(Act 2019-94, §1.)
(a) The stockholders may remove one or more directors with or without cause unless the certificate of incorporation provides that directors may be removed only for cause.
(b) If a director is elected by a voting group of stockholders, only the stockholders of that voting group may participate in the vote to remove that director.
(c) A director may be removed if the number of votes cast to remove exceeds the number of votes cast not to remove the director, except to the extent the certificate of incorporation or bylaws require a greater number; provided that if cumulative voting is authorized, a director may not be removed if, in the case of a meeting, the number of votes sufficient to elect the director under cumulative voting is voted against removal and, if in the case of an action by written consent, the action is taken by less than unanimous consent.
(d) A director may be removed by the stockholders only at a meeting called for the purpose of removing the director and the meeting notice must state that removal of the director is a purpose of the meeting.
(Act 2019-94, §1.)
(a) The designated court, and if none, the circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the corporation’s most recent registered office is located may remove a director from office or may order other relief, including barring the director from reelection for a period prescribed by the court, in a proceeding commenced by or in the right of the corporation if the court finds that (i) the director engaged in fraudulent conduct with respect to the corporation or its stockholders, grossly abused the position of director, or intentionally inflicted harm on the corporation; and (ii) considering the director’s course of conduct and the inadequacy of other available remedies, removal or such other relief would be in the best interest of the corporation.
(b) A stockholder proceeding on behalf of the corporation under subsection (a) shall comply with all of the requirements of Division D of Article 7, except clause (2) of Section 10A-2A-7.42.
(Act 2019-94, §1; Act 2020-73, §7.)
(a) Except as otherwise provided in Section 10A-2A-8.10(b) or the certificate of incorporation, if a vacancy occurs on the board of directors, including a vacancy resulting from an increase in the number of directors:
(1) the stockholders may fill the vacancy;
(2) the board of directors may fill the vacancy; or
(3) if the directors remaining in office are less than a quorum, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office.
(b) Unless the certificate of incorporation provides otherwise, if the vacant office was held by a director elected by a voting group of stockholders, only the holders of stock of that voting group are entitled to vote to fill the vacancy if it is filled by the stockholders, and only the remaining directors elected by that voting group, even if less than a quorum, are entitled to fill the vacancy if it is filled by the directors.
(c) A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date under Section 10A-2A-8.07(b) or otherwise) may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs.
(Act 2019-94, §1; Act 2023-503, §3.)
Unless the certificate of incorporation or bylaws provide otherwise, the board of directors may fix the compensation of directors.
(Act 2019-94, §1.)
(a) The board of directors may hold regular or special meetings in or out of this state.
(b) Unless restricted by the certificate of incorporation or bylaws, any or all directors may participate in any meeting of the board of directors through the use of any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.
(Act 2019-94, §1.)
(a) Except to the extent that the certificate of incorporation or bylaws require that action by the board of directors be taken at a meeting, action required or permitted by this chapter to be taken by the board of directors may be taken without a meeting if each director signs a consent describing the action to be taken and delivers it to the corporation.
(b) Action taken under this section is the act of the board of directors when one or more consents signed by all the directors are delivered to the corporation. Any director executing a consent may provide, whether through instruction to an agent or otherwise, that such consent will be effective at a future time, including a time determined upon the happening of an event, occurring not later than 60 days after such instruction is given or such provision is made, if evidence of the instruction or provision is provided to the corporation. A director’s consent may be withdrawn by a revocation signed by the director and delivered to the corporation before delivery to the corporation of unrevoked written consents signed by all the directors.
(c) A consent signed under this section has the effect of action taken at a meeting of the board of directors and may be described as such in any document.
(Act 2019-94, §1; Act 2023-503, §3.)
(a) Unless the certificate of incorporation or bylaws provide otherwise, regular meetings of the board of directors may be held without notice of the place, if any, date, time, or purpose of the meeting.
(b) Unless the certificate of incorporation or bylaws provide for a longer or shorter period, special meetings of the board of directors shall be preceded by at least two days’ notice of the place, if any, date, time of the meeting. The notice need not describe the purpose of the special meeting unless required by the certificate of incorporation or bylaws.
(Act 2019-94, §1; Act 2023-503, §3.)
(a) A director may waive any notice required by this chapter, the certificate of incorporation or the bylaws before or after the date and time stated in the notice. Except as provided by subsection (b), the waiver must be in writing, signed by the director entitled to the notice and delivered to the corporation for filing by the corporation with the minutes or corporate records.
(b) A director’s attendance at or participation in a meeting waives any required notice to the director of the meeting unless the director at the beginning of the meeting (or promptly upon arrival) objects to holding the meeting or transacting business at the meeting and does not after objecting vote for or assent to action taken at the meeting.
(Act 2019-94, §1.)
(a) Unless the certificate of incorporation or bylaws provide for a greater or lesser number or unless otherwise expressly provided in this chapter, a quorum of a board of directors consists of a majority of the number of directors specified in or fixed in accordance with the certificate of incorporation or bylaws.
(b) The quorum of the board of directors specified in or fixed in accordance with the certificate of incorporation or bylaws may not consist of less than one-third of the specified or fixed number of directors.
(c) If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board of directors unless the certificate of incorporation or bylaws require the vote of a greater number of directors or unless otherwise expressly provided in this chapter.
(d) A director who is present at a meeting of the board of directors or a committee when corporate action is taken is deemed to have assented to the action taken unless: (i) the director objects at the beginning of the meeting (or promptly upon arrival) to holding it or transacting business at the meeting; (ii) the dissent or abstention from the action taken is entered in the minutes of the meeting; or (iii) the director delivers written notice of the director’s dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken.
(Act 2019-94, §1; Act 2023-503, §1.)
(a) Unless this chapter, the certificate of incorporation, or the bylaws provide otherwise, a board of directors may establish one or more board committees composed exclusively of one or more directors to perform functions of the board of directors.
(b) The establishment of a board committee and appointment of members to it shall be approved by the greater of (i) a majority of all the directors in office when the action is taken or (ii) the number of directors required by the certificate of incorporation or bylaws to take action under Section 10A-2A-8.24, unless, in either case, this chapter or the certificate of incorporation provides otherwise.
(c) Section 10A-2A-8.20 through Section 10A-2A-8.24 apply to board committees and their members.
(d) A board committee may exercise the powers of the board of directors under Section 10A-2A-8.01, to the extent specified by the board of directors or in the certificate of incorporation or bylaws, except that a board committee may not:
(1) authorize or approve distributions, except according to a formula or method, or within limits, prescribed by the board of directors;
(2) approve or propose to stockholders action that this chapter requires be approved by stockholders;
(3) fill vacancies on the board of directors or, subject to subsection (e), on any board committees; or
(4) adopt, amend, or repeal bylaws or amend or restate the certificate of incorporation.
(e) The board of directors may appoint one or more directors as alternate members of any board committee to replace any absent or disqualified member during the member’s absence or disqualification. If the certificate of incorporation, the bylaws, or the resolution creating the board committee so provide, the member or members present at any board committee meeting and not disqualified from voting may, by unanimous action, appoint another director to act in place of an absent or disqualified member during that member’s absence or disqualification.
(Act 2019-94, §1.)
A corporation may agree to submit a matter to a vote of its stockholders even if, after approving the matter, the board of directors determines it no longer recommends the matter.
(Act 2019-94, §1.)
(a) Whenever this chapter expressly requires the board of directors to approve or take other action with respect to any agreement, instrument, plan, or document, such agreement, instrument, plan, or document may be approved by the board of directors in final form or in substantially final form. Substantially final form means that all of the material terms are set forth in the agreement, instrument, plan, or document, or are determinable through other information or materials presented to or known by the board of directors, or are determinable by a combination thereof, except as otherwise described in subsection (c).
(b) If the board of directors shall have acted to approve or take other action with respect to an agreement, instrument, plan, or document that is expressly required by this chapter to be approved by the board of directors, the board of directors may, but is not required to, at any time after providing the approval or taking such other action adopt a resolution ratifying the agreement, instrument, plan, or document, and the ratification shall be deemed to be effective as of the time of the original approval or other action by the board of directors and to satisfy any requirement under this chapter that the board of directors approve or take other action with respect to the agreement, instrument, plan, or document in a specific manner or sequence.
(c) At the time of the approval of any agreement, instrument, plan, or document by the board of directors, the agreement, instrument, plan, or document is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the agreement, instrument, plan, or document that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the agreement, instrument, plan, or document.
(Act 2025-281, §8; Act 2026-495, §1.)
Division C of Article 3 of Chapter 1 shall not apply to this chapter. Instead:
(a) Each member of the board of directors, when discharging the duties of a director, shall act: (i) in good faith, and (ii) in a manner the director reasonably believes to be in the best interests of the corporation.
(b) The members of the board of directors or a board committee, when becoming informed in connection with their decision-making function or devoting attention to their oversight function, shall discharge their duties with the care that a person in a like position would reasonably believe appropriate under similar circumstances.
(c) In discharging board of directors or board committee duties, a director shall disclose, or cause to be disclosed, to the other board of directors or board committee members information not already known by them but known by the director to be material to the discharge of their decision-making or oversight functions, except that disclosure is not required to the extent that the director reasonably believes that doing so would violate a duty imposed under law, a legally enforceable obligation of confidentiality, or a professional ethics rule.
(d) In discharging board of directors or board committee duties, a director who does not have knowledge that makes reliance unwarranted is entitled to rely on the performance by any of the persons specified in subsection (f)(1) or subsection (f)(3) to whom the board of directors may have delegated, formally or informally by course of conduct, the authority or duty to perform one or more of the board of directors’ functions that are delegable under applicable law.
(e) In discharging board of directors or board committee duties, a director who does not have knowledge that makes reliance unwarranted is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, prepared or presented by any of the persons specified in subsection (f).
(f) A director is entitled to rely, in accordance with subsection (d) or (e), on:
(1) one or more officers or employees of the corporation whom the director reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports or statements provided;
(2) legal counsel, public accountants, or other persons retained by the corporation as to matters involving skills or expertise the director reasonably believes are matters (i) within the particular person’s professional or expert competence, or (ii) as to which the particular person merits confidence; or
(3) a board committee of which the director is not a member if the director reasonably believes the committee merits confidence.
(Act 2019-94, §1; Act 2021-299, §3.)
Division C of Article 3 of Chapter 1 shall not apply to this chapter. Instead:
(a) A director shall not be liable to the corporation or its stockholders for any decision to take or not to take action, or any failure to take any action, as a director, unless the party asserting liability in a proceeding establishes that:
(1) no defense interposed by the director based on (i) any provision in the certificate of incorporation authorized by Section 10A-2A-2.02(b)(4) or by Section 10A-2A-2.02(b)(6), or (ii) the protection afforded by Section 10A-2A-8.60, precludes liability; and
(2) the challenged conduct consisted or was the result of:
(i) action not in good faith; or
(ii) a decision
(A) which the director did not reasonably believe to be in the best interests of the corporation, or
(B) as to which the director was not informed to an extent the director reasonably believed appropriate in the circumstances; or
(iii) a lack of objectivity due to the director’s familial, financial or business relationship with, or a lack of independence due to the director’s domination or control by, another person having a material interest in the challenged conduct,
(A) which relationship or which domination or control could reasonably be expected to have affected the director’s judgment respecting the challenged conduct in a manner adverse to the corporation, and
(B) after a reasonable expectation to that effect has been established, the director shall not have established that the challenged conduct was reasonably believed by the director to be in the best interests of the corporation; or
(iv) a sustained failure of the director to devote attention to ongoing oversight of the business and affairs of the corporation, or a failure to devote timely attention, by making (or causing to be made) appropriate inquiry, when particular facts and circumstances of significant concern materialize that would alert a reasonably attentive director to the need for that inquiry; or
(v) receipt of a financial benefit to which the director was not entitled or any other breach of the director’s duties to deal fairly with the corporation and its stockholders that is actionable under applicable law.
(b) The party seeking to hold the director liable:
(1) for money damages, shall also have the burden of establishing that:
(i) harm to the corporation or its stockholders has been suffered, and
(ii) the harm suffered was proximately caused by the director’s challenged conduct; or
(2) for other money payment under a legal remedy, such as compensation for the unauthorized use of corporate assets, shall also have whatever persuasion burden may be called for to establish that the payment sought is appropriate in the circumstances; or
(3) for other money payment under an equitable remedy, such as profit recovery by or disgorgement to the corporation, shall also have whatever persuasion burden may be called for to establish that the equitable remedy sought is appropriate in the circumstances.
(c) Nothing contained in this section shall (i) in any instance where fairness is at issue alter the burden of proving the fact or lack of fairness otherwise applicable, (ii) alter the fact or lack of liability of a director under another section of this chapter, such as the provisions governing the consequences of an unlawful distribution under Section 10A-2A-8.32 or a transactional interest under Section 10A-2A-8.60, or (iii) affect any rights to which the corporation or a stockholder may be entitled under another statute of this state or the United States.
(Act 2019-94, §1; Act 2021-299, §3.)
(a) A director who votes for or assents to a distribution in excess of what may be authorized and made pursuant to Section 10A-2A-6.40(a) or Section 10A-2A-14.08(a) is personally liable to the corporation for the amount of the distribution that exceeds what could have been distributed without violating Section 10A-2A-6.40(a) or Section 10A-2A-14.08(a) if the party asserting liability establishes that when taking the action the director did not comply with Section 10A-2A-8.30.
(b) A director held liable under subsection (a) for an unlawful distribution is entitled to:
(1) contribution from every other director who could be held liable under subsection (a) for the unlawful distribution; and
(2) recoupment from each stockholder of the pro-rata portion of the amount of the unlawful distribution the stockholder accepted, knowing the distribution was made in violation of Section 10A-2A-6.40(a) or Section 10A-2A-14.08(a).
(c) A proceeding to enforce:
(1) the liability of a director under subsection (a) is barred unless it is commenced within two years after the date (i) on which the effect of the distribution was measured under Section 10A-2A-6.40(e) or (g), (ii) as of which the violation of Section 10A-2A-6.40(a) occurred as the consequence of disregard of a restriction in the certificate of incorporation, or (iii) on which the distribution of assets to stockholders under Section 10A-2A-14.08(a) was made; or
(2) contribution or recoupment under subsection (b) is barred unless it is commenced within one year after the liability of the claimant has been finally adjudicated under subsection (a).
(Act 2019-94, §1.)
(a) A corporation has the officers described in its certificate of incorporation or bylaws or appointed by the board of directors in accordance with the certificate of incorporation or bylaws.
(b) The board of directors may elect individuals to fill one or more offices of the corporation. An officer may appoint one or more officers if authorized by the certificate of incorporation or bylaws or the board of directors.
(c) The certificate of incorporation, bylaws, or the board of directors shall assign to an officer responsibility for maintaining and authenticating the records of the corporation required to be kept under Section 10A-2A-16.01(a).
(d) Unless the certificate of incorporation or bylaws provide otherwise, the same individual may simultaneously hold more than one office in a corporation.
(Act 2019-94, §1.)
Each officer has the authority and shall perform the functions set forth in the certificate of incorporation or bylaws or, to the extent consistent with the certificate of incorporation or bylaws, the functions prescribed by the board of directors or by direction of an officer authorized by the board of directors to prescribe the functions of other officers.
(Act 2019-94, §1.)
Division C of Article 3 of Chapter 1 shall not apply to this chapter. Instead:
(a) An officer, when performing in his or her capacity as such, has the duty to act:
(1) in good faith;
(2) with the care that a person in a like position would reasonably exercise under similar circumstances; and
(3) in a manner the officer reasonably believes to be in the best interests of the corporation.
(b) The duty of an officer includes the obligation:
(1) to inform the superior officer to whom, or the board of directors or the board committee to which, the officer reports of information about the affairs of the corporation known to the officer, within the scope of the officer’s functions, and known to the officer to be material to that superior officer, board of directors or board committee; and
(2) to inform his or her superior officer, or another appropriate person within the corporation, or the board of directors, or a board committee, of any actual or probable material violation of law involving the corporation or material breach of duty to the corporation by an officer, employee, or agent of the corporation, that the officer believes has occurred or is likely to occur.
(c) In discharging an officer’s duties, an officer who does not have knowledge that makes reliance unwarranted is entitled to rely on:
(1) the performance of properly delegated responsibilities by one or more employees of the corporation whom the officer reasonably believes to be reliable and competent in performing the responsibilities delegated; or
(2) information, opinions, reports or statements, including financial statements and other financial data, prepared or presented by one or more employees of the corporation whom the officer reasonably believes to be reliable and competent in the matters presented or by legal counsel, public accountants, or other persons retained by the corporation as to matters involving skills or expertise the officer reasonably believes are matters (i) within the particular person’s professional or expert competence or (ii) as to which the particular person merits confidence.
(d) An officer shall not be liable to the corporation or its stockholders for any decision to take or not to take action, or any failure to take any action, as an officer, if the duties of the office are performed in compliance with this section. Whether an officer who does not comply with this section shall have liability will depend in each instance on applicable law, including those principles of Section 10A-2A-8.31 that have relevance.
(Act 2019-94, §1; Act 2021-299, §3.)
Division C of Article 3 of Chapter 1 shall not apply to this chapter. Instead:
(a) An officer may resign at any time by delivering a written notice to the board of directors, its chair, the appointing officer, the secretary, or the corporation. A resignation is effective as provided in Section 10A-2A-1.41(i) unless the notice provides for a delayed effectiveness, including effectiveness determined upon a future event or events. If effectiveness of a resignation is stated to be delayed and the board of directors or the appointing officer accepts the delay, the board of directors or the appointing officer may fill the pending vacancy before the delayed effectiveness but the new officer may not take office until the vacancy occurs.
(b) An officer may be removed at any time with or without cause by (i) the board of directors; (ii) the appointing officer, unless the certificate of incorporation, bylaws, or the board of directors provide otherwise; or (iii) any other officer if authorized by the certificate of incorporation, bylaws, or the board of directors.
(c) In this section, “appointing officer” means the officer (including any successor to that officer) who appointed the officer resigning or being removed.
(Act 2019-94, §1; Act 2021-299, §3.)
(a) The election or appointment of an officer does not itself create contract rights.
(b) An officer’s removal does not affect the officer’s contract rights, if any, with the corporation. An officer’s resignation does not affect the corporation’s contract rights, if any, with the officer.
(Act 2019-94, §1.)
In this division:
(1) “Corporation” includes any domestic or foreign predecessor entity of a corporation.
(2) “Director” or “officer” means an individual who is or was a director or officer, respectively, of a corporation or who, while a director or officer of the corporation, is or was serving at the corporation’s request as a director, officer, manager, partner, trustee, employee, or agent of another entity or employee benefit plan. A director or officer is considered to be serving an employee benefit plan at the corporation’s request if the individual’s duties to the corporation also impose duties on, or otherwise involve services by, the individual to the plan or to participants in or beneficiaries of the plan. “Director” or “officer” includes, unless the context requires otherwise, the estate or personal representative of a director or officer.
(3) “Liability” means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or expenses incurred with respect to a proceeding.
(4) “Official capacity” means: (i) when used with respect to a director, the office of director in a corporation; and (ii) when used with respect to an officer, as contemplated in Section 10A-2A-8.56, the office in a corporation held by the officer. “Official capacity” does not include service for any other corporation or foreign corporation or any joint venture, trust, employee benefit plan, or other entity.
(5) “Party” means an individual who was, is, or is threatened to be made, a defendant or respondent in a proceeding.
(6) “Proceeding” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative and whether formal or informal.
(Act 2019-94, §1.)
(a) Except as otherwise provided in this section, a corporation may indemnify an individual who is a party to a proceeding because the individual is a director against liability incurred in the proceeding if:
(1) (i) the director conducted himself or herself in good faith; and
(ii) the director reasonably believed:
(A) in the case of conduct in an official capacity, that his or her conduct was in the best interests of the corporation; and
(B) in all other cases, that his or her conduct was at least not opposed to the best interests of the corporation; and
(iii) in the case of any criminal proceeding, the director had no reasonable cause to believe his or her conduct was unlawful; or
(2) the director engaged in conduct for which broader indemnification has been made permissible or obligatory under a provision of the certificate of incorporation (as authorized by Section 10A-2A-2.02(b)(5)).
(b) A director’s conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in, and the beneficiaries of, the plan is conduct that satisfies the requirement of subsection (a)(1)(ii)(B).
(c) The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, is not, of itself, determinative that the director did not meet the relevant standard of conduct described in this section.
(d) Unless ordered by a court under Section 10A-2A-8.54(a)(3), a corporation may not indemnify a director:
(1) in connection with a proceeding by or in the right of the corporation, except for expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard of conduct under subsection (a); or
(2) in connection with any proceeding with respect to conduct for which the director was adjudged liable on the basis of receiving a financial benefit to which he or she was not entitled, regardless of whether it involved action in the director’s official capacity.
(Act 2019-94, §1.)
A corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director was a party because he or she was a director of the corporation against expenses incurred by the director in connection with the proceeding.
(Act 2019-94, §1.)
(a) A corporation may, before final disposition of a proceeding, advance funds to pay for or reimburse expenses incurred in connection with the proceeding by an individual who is a party to the proceeding because that individual is a director if the director delivers to the corporation a signed written undertaking of the director to repay any funds advanced if (i) the director is not entitled to mandatory indemnification under Section 10A-2A-8.52 and (ii) it is ultimately determined under Section 10A-2A-8.54 or Section 10A-2A-8.55 that the director is not entitled to indemnification.
(b) The undertaking required by subsection (a) must be an unlimited general obligation of the director but need not be secured and may be accepted without reference to the financial ability of the director to make repayment.
(c) Authorizations under this section shall be made:
(1) by the board of directors:
(i) if there are two or more qualified directors, by a majority vote of all the qualified directors (a majority of whom shall for that purpose constitute a quorum) or by a majority of the members of a committee consisting solely of two or more qualified directors appointed by a majority vote of qualified directors; or
(ii) if there are fewer than two qualified directors, by the vote necessary for action by the board of directors in accordance with Section 10A-2A-8.24(c), in which authorization directors who are not qualified directors may participate; or
(2) by the stockholders, but stock owned by or voted under the control of a director who at the time is not a qualified director may not be voted on the authorization.
(Act 2019-94, §1.)
(a) A director who is a party to a proceeding because he or she is a director may apply for indemnification or an advance for expenses to the court conducting the proceeding or to another court of competent jurisdiction. After receipt of an application and after giving any notice it considers necessary, the court shall:
(1) order indemnification if the court determines that the director is entitled to mandatory indemnification under Section 10A-2A-8.52;
(2) order indemnification or advance for expenses if the court determines that the director is entitled to indemnification or advance for expenses pursuant to a provision authorized by Section 10A-2A-8.58(a); or
(3) order indemnification or advance for expenses if the court determines, in view of all the relevant circumstances, that it is fair and reasonable (i) to indemnify the director, or (ii) to advance expenses to the director, even if, in the case of (i) or (ii), he or she has not met the relevant standard of conduct set forth in Section 10A-2A-8.51(a), failed to comply with Section 10A-2A-8.53 or was adjudged liable in a proceeding referred to in Section 10A-2A-8.51(d)(1) or Section 10A-2A-8.51(d)(2), but if the director was adjudged so liable indemnification shall be limited to expenses incurred in connection with the proceeding.
(b) If the court determines that the director is entitled to indemnification under subsection (a)(1) or to indemnification or advance for expenses under subsection (a)(2), it shall also order the corporation to pay the director’s expenses incurred in connection with obtaining court-ordered indemnification or advance for expenses. If the court determines that the director is entitled to indemnification or advance for expenses under subsection (a)(3), it may also order the corporation to pay the director’s expenses to obtain court-ordered indemnification or advance for expenses.
(Act 2019-94, §1.)
(a) A corporation may not indemnify a director under Section 10A-2A-8.51 unless authorized for a specific proceeding after a determination has been made that indemnification is permissible because the director has met the relevant standard of conduct set forth in Section 10A-2A-8.51.
(b) The determination shall be made:
(1) if there are two or more qualified directors, by the board of directors by a majority vote of all the qualified directors (a majority of whom shall for that purpose constitute a quorum), or by a majority of the members of a committee of two or more qualified directors appointed by a majority vote of qualified directors;
(2) by special legal counsel:
(i) selected in the manner prescribed in subsection (b)(1); or
(ii) if there are fewer than two qualified directors, selected by the board of directors (in which selection directors who are not qualified directors may participate); or
(3) by the stockholders, but stock owned by or voted under the control of a director who at the time is not a qualified director may not be voted on the determination.
(c) Authorization of indemnification shall be made in the same manner as the determination that indemnification is permissible except that if there are fewer than two qualified directors, or if the determination is made by special legal counsel, authorization of indemnification shall be made by those entitled to select special legal counsel under subsection (b)(2)(ii).
(Act 2019-94, §1.)
(a) A corporation may indemnify and advance expenses under this Division E of this Article 8 to an officer who is a party to a proceeding because he or she is an officer
(1) to the same extent as a director; and
(2) if he or she is an officer but not a director, to such further extent as may be provided by the certificate of incorporation or the bylaws, or by a resolution adopted or a contract approved by the board of directors or stockholders, except for
(i) liability in connection with a proceeding by or in the right of the corporation other than for expenses incurred in connection with the proceeding, or
(ii) liability arising out of conduct that constitutes
(A) receipt by the officer of a financial benefit to which he or she is not entitled,
(B) an intentional infliction of harm on the corporation or the stockholders, or
(C) an intentional violation of criminal law.
(b) Subsection (a)(2) shall apply to an officer who is also a director if he or she is made a party to the proceeding based on an act or omission solely as an officer.
(c) An officer who is not a director is entitled to mandatory indemnification under Section 10A-2A-8.52, and may apply to a court under Section 10A-2A-8.54 for indemnification or an advance for expenses, in each case to the same extent to which a director may be entitled to indemnification or advance for expenses under those sections.
(Act 2019-94, §1.)
A corporation may purchase and maintain insurance on behalf of an individual who is a director or officer of the corporation, or who, while a director or officer of the corporation, serves at the corporation’s request as a director, officer, partner, trustee, employee, or agent of another corporation or foreign corporation or a joint venture, trust, employee benefit plan, or other entity, against liability asserted against or incurred by the individual in that capacity or arising from the individual’s status as a director or officer, regardless of whether the corporation would have power to indemnify or advance expenses to the individual against the same liability under this Division E of this Article 8.
(Act 2019-94, §1.)
(a) A corporation may, by a provision in its certificate of incorporation, bylaws, or in a resolution adopted or a contract approved by the board of directors or stockholders, obligate itself in advance of the act or omission giving rise to a proceeding to provide indemnification in accordance with Section 10A-2A-8.51 or advance funds to pay for or reimburse expenses in accordance with Section 10A-2A-8.53. Any obligatory provision shall be deemed to satisfy the requirements for authorization referred to in Section 10A-2A-8.53(c) and in Section 10A-2A-8.55(c). Any provision that obligates the corporation to provide indemnification to the fullest extent permitted by law shall be deemed to obligate the corporation to advance funds to pay for or reimburse expenses in accordance with Section 10A-2A-8.53 to the fullest extent permitted by law, unless the provision expressly provides otherwise.
(b) A right of indemnification or to advances for expenses created by this Division E of this Article 8 or under subsection (a) and in effect at the time of an act or omission shall not be eliminated or impaired with respect to the act or omission by an amendment of the certificate of incorporation, bylaws, or a resolution of the board of directors or stockholders, adopted after the occurrence of the act or omission, unless, in the case of a right created under subsection (a), the provision creating the right and in effect at the time of the act or omission explicitly authorizes elimination or impairment after the act or omission has occurred.
(c) Any provision pursuant to subsection (a) shall not obligate the corporation to indemnify or advance expenses to a director of a predecessor of the corporation, pertaining to conduct with respect to the predecessor, unless otherwise expressly provided. Any provision for indemnification or advance for expenses in the certificate of incorporation, bylaws, or a resolution of the board of directors or stockholders of a predecessor of the corporation in a merger or in a contract to which the predecessor is a party, existing at the time the merger takes effect, shall be governed by Section 10A-2A-11.07(a)(4).
(d) Subject to subsection (b), a corporation may, by a provision in its certificate of incorporation, limit any of the rights to indemnification or advance for expenses created by or pursuant to this Division E of this Article 8.
(e) This Division E of this Article 8 does not limit a corporation’s power to pay or reimburse expenses incurred by a director or an officer in connection with appearing as a witness in a proceeding at a time when he or she is not a party.
(f) This Division E of this Article 8 does not limit a corporation’s power to indemnify, advance expenses to or provide or maintain insurance on behalf of an employee or agent.
(Act 2019-94, §1.)
A corporation may provide indemnification or advance expenses to a director or an officer only as permitted by this Division E.
(Act 2019-94, §1; Act 2021-299, §3; Act 2023-503, §3.)
(a) As used in this chapter, unless otherwise specified or unless the context otherwise requires, the following terms shall mean:
(1) CONFLICTING INTEREST TRANSACTION means an act or transaction effected or proposed to be effected by the corporation (or by an entity controlled by the corporation):
(i) to which, at the relevant time, a director or officer is a party;
(ii) respecting which, at the relevant time, the director or officer had knowledge and a material financial interest known to the director or officer; or
(iii) respecting which, at the relevant time, the director or officer knew that a related person was a party or had a material financial interest.
(2) CONTROL or CONTROLLED BY means (i) having the power, directly or indirectly, to elect or remove a majority of the members of the board of directors or other governing authority of an entity, whether through the ownership of voting shares or interests, by contract, or otherwise or (ii) being subject to a majority of the risk of loss from the entity’s activities or entitled to receive a majority of the entity’s residual returns.
(3) CONTROL GROUP means two or more persons that are not controlling stockholders that, by virtue of an agreement, arrangement, or understanding between or among those persons, constitute a controlling stockholder.
(4) CONTROLLING STOCKHOLDER means any person that, together with (i) any related person and (ii) any person that controls, is controlled by, or is under common control with that person:
(A) owns or controls a majority in voting power of the outstanding stock of the corporation entitled to vote generally in the election of directors or in the election of directors who have a majority in voting power of the votes of all directors on the board of directors;
(B) has the right, by contract or otherwise, to cause the election of nominees who are selected at the discretion of that person and who constitute either a majority of the members of the board of directors or directors entitled to cast a majority in voting power of the votes of all directors on the board of directors;
(C) has the power functionally equivalent to that of a stockholder that owns or controls a majority in voting power of the outstanding stock of the corporation entitled to vote generally in the election of directors by virtue of ownership or control of at least one-third in voting power of the outstanding stock of the corporation entitled to vote generally in the election of directors or in the election of directors who have a majority in voting power of the votes of all directors on the board of directors and the power to exercise managerial authority over the business and affairs of the corporation; or
(D) owns or controls a majority in voting power of the outstanding stock of the corporation entitled to vote generally when the board of directors has been eliminated under Section 10A-2A-7.32.
(5) CONTROLLING STOCKHOLDER TRANSACTION means an act or transaction between the corporation or one or more of its subsidiaries, on the one hand, and a controlling stockholder or a control group, on the other hand, or an act or transaction from which a controlling stockholder or a control group receives a material financial or other benefit not shared with the corporation’s stockholders generally; provided that a merger under Section 10A-2A-11.05 is not a controlling stockholder transaction.
(6) DISINTERESTED STOCKHOLDER means any stockholder that does not have a material financial interest in the act or transaction at issue or, if applicable, a material relationship with the controlling stockholder or other member of the control group, or any other person that has a material financial interest in the act or transaction.
(7) FAIR TO THE CORPORATION means the act or transaction at issue, as a whole, is beneficial to the corporation or its stockholders in their capacity as stockholders, given the consideration paid to or received by the corporation or its stockholders or other benefit conferred on the corporation or its stockholders and taking into appropriate account whether the act or transaction meets both of the following: (i) it is fair in terms of the director’s, officer’s, controlling stockholder’s, or control group’s dealings with the corporation, as the case may be; and (ii) it is comparable to what might have been obtainable in an arm’s length transaction available to the corporation.
(8) GOING PRIVATE TRANSACTION means, other than a merger under Section 10A-2A-11.05:
(i) for a corporation with a class of equity securities subject to Section 12(g) or Section 15(d) of the Securities Exchange Act of 1934 [15 U.S.C. § 78l(g) or § 78o(d)] or listed on a national securities exchange, a “Rule 13e-3 transaction” (as defined in 17 CFR § 240.13e-3(a)(3) or any successor provision); and
(ii) for any other corporation to which subsection (a)(8)(i) does not apply, a transaction that (A) is a controlling stockholder transaction, including a merger, recapitalization, stock purchase, amendment to the certificate of incorporation, tender or exchange offer, stock exchange, or conversion and (B) pursuant to which all or substantially all of the shares of the corporation’s capital stock held by the disinterested stockholders (but not those of the controlling stockholder or control group) are cancelled, converted, purchased, or otherwise acquired or cease to be outstanding in exchange for cash or property other than the stock or an eligible interest in the surviving organization.
(9) MATERIAL FINANCIAL INTEREST means a nonspeculative financial interest in an act or transaction, other than one that would devolve on the corporation or the stockholders generally, that (i) in the case of a director or officer, would reasonably be expected to impair the objectivity of the director’s or officer’s judgment when participating in the negotiation, authorization, or approval of the act or transaction at issue or (ii) in the case of a stockholder or any other person (other than a director or officer), would be material to such stockholder or such other person.
(10) MATERIAL RELATIONSHIP has the meaning set forth in Section 10A-2A-1.43.
(11) QUALIFIED DIRECTOR has the meaning set forth in Section 10A-2A-1.43.
(12) RELATED PERSON has the meaning set forth in Section 10A-2A-2.02.
(13) RELEVANT TIME means (i) the time at which a directors’ action respecting the act or transaction is taken in compliance with subsection (c) or (ii) if the act or transaction is not brought before the board of directors (or a committee thereof) for action under subsection (c), at the time the corporation (or an entity controlled by the corporation) becomes legally obligated to consummate the act or transaction.
(14) REQUIRED DISCLOSURE means disclosure of (i) the existence and nature of the director’s or officer’s conflicting interest and (ii) all facts known to the director or officer respecting the subject matter of the act or transaction that a qualified director would reasonably believe to be material in deciding whether to proceed with the act or transaction.
(b)(1) An act or transaction effected or proposed to be effected by a corporation (or by an entity controlled by the corporation) may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a director or officer of the corporation, on the grounds that the director or officer has an interest respecting the act or transaction, if the act or transaction is not a conflicting interest transaction.
(2) Except for a controlling stockholder transaction under subsection (e), a conflicting interest transaction may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a director or officer of the corporation, in a proceeding by a stockholder or by or in the right of the corporation, on the grounds that the director or officer has an interest respecting the conflicting interest transaction, if:
(i) the directors’ action respecting the act or transaction was taken in compliance with subsection (c) at any time; or
(ii) the stockholders’ action respecting the act or transaction was taken in compliance with subsection (d) at any time; or
(iii) the act or transaction is at the relevant time fair to the corporation.
(c)(1) Directors’ action respecting a conflicting interest transaction is effective for purposes of subsection (b)(2)(i) if the conflicting interest transaction has been authorized, after required disclosure by the conflicted director or officer of information not already known by the qualified directors, or after modified disclosure in compliance with subsection (c)(2), by (A) the affirmative vote of a majority (but no fewer than two) of the qualified directors who voted on the conflicting interest transaction or (B) the affirmative vote of a majority of the members of a board committee that is composed of only qualified directors (but no fewer than two). Directors’ action respecting a conflicting interest transaction is effective even though the conflicted director or officer is present at or participates in the meeting of the board or committee which authorizes the act or transaction or was involved in the initiation, negotiation, or approval of the act or transaction.
(2) Notwithstanding subsection (c)(1), when a transaction is a conflicting interest transaction only because a related person described in clause (v) or (vi) of the definition of “related person” in Section 10A-2A-2.02 is a party to or has a material financial interest in the conflicting interest transaction, the conflicted director or officer is not obligated to make required disclosure to the extent that the director or officer reasonably believes that doing so would violate a duty imposed under law, a legally enforceable obligation of confidentiality, or a professional ethics rule, provided that the conflicted director or officer discloses to the qualified directors voting on the conflicting interest transaction:
(i) all information required to be disclosed that is not so violative;
(ii) the existence and nature of the director’s or officer’s conflicting interest; and
(iii) the nature of the conflicted director’s or officer’s duty not to disclose the confidential information.
(3) A majority (but no fewer than two) of all the qualified directors on the board of directors, or on the board committee, constitutes a quorum for purposes of action that complies with this section.
(4) Where directors’ action under this subsection (c) does not satisfy a quorum or voting requirement applicable to the authorization of the conflicting interest transaction by reason of the certificate of incorporation, the bylaws, or another provision of this chapter, independent action to satisfy those authorization requirements shall be taken by the board of directors or a board committee, in which action directors who are not qualified directors may participate.
(5) Where directors’ action under this subsection (c) is taken without a meeting in accordance with Section 10A-2A-8.21, the action is effective even though a conflicted director signs a consent to that action.
(d)(1) Stockholders’ action respecting a conflicting interest transaction is effective for purposes of subsection (b)(2)(ii) if a majority of the votes cast by the holders of all qualified shares are in favor of the conflicting interest transaction after (i) notice to stockholders describing the action to be taken respecting the conflicting interest transaction, (ii) provision to the corporation of the information referred to in subsection (d)(2), and (iii) communication to the stockholders entitled to vote on the conflicting interest transaction of the information that is the subject of required disclosure, to the extent the information is not already known by them. In the case of stockholders’ action at a meeting, the stockholders entitled to vote shall be determined as of the record date for notice of the meeting.
(2) A director or officer who has a conflicting interest respecting the conflicting interest transaction shall, before the stockholders’ vote, inform the secretary or other officer or agent of the corporation authorized to tabulate votes, in writing, of the number of shares that the director or officer knows are not qualified shares under subsection (c), and the identity of the holders of those shares.
(3) For purposes of this section: (i) “holder” means and “held by” refers to shares held by a record stockholder, a beneficial stockholder, and an unrestricted voting trust beneficial owner and (ii) “qualified shares” means all shares entitled to be voted with respect to the conflicting interest transaction except for shares that the secretary or other officer or agent of the corporation authorized to tabulate votes either knows, or under subsection (b) is notified, are held by (A) a director or officer who has a conflicting interest respecting the conflicting interest transaction or (B) a related person of the director or officer (excluding a person described in clause (vi) of the definition of a related person in Section 10A-2A-2.02).
(4) A majority of the votes entitled to be cast by the holders of all qualified shares constitutes a quorum for purposes of compliance with this section. Subject to the provisions of subsection (e), stockholders’ action that otherwise complies with this section is not affected by the presence of holders, or by the voting, of shares that are not qualified shares.
(5) If a stockholders’ vote does not comply with subsection (d)(1) solely because of a director’s or officer’s failure to comply with subsection (d)(2), and if the director or officer establishes that the failure was not intended to influence and did not in fact determine the outcome of the vote, then the action by the stockholders respecting the conflicting interest transaction shall be given effect.
(6) Where stockholders’ action under this section does not satisfy a quorum or voting requirement applicable to the authorization of the conflicting interest transaction by reason of the certificate of incorporation, the bylaws, or another provision of this chapter, independent action to satisfy those authorization requirements shall be taken by the stockholders, in which action shares that are not qualified shares may participate.
(7) Where stockholders’ action under this subsection (d) is taken without a meeting in accordance with Section 10A-2A-7.04, the action is effective even though stockholders holding shares that are not qualified shares sign a consent to that action.
(e)(1) An act or transaction effected or proposed to be effected by the corporation (or by an entity controlled by the corporation) may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a stockholder of the corporation, on the grounds that the stockholder has an interest respecting the act or transaction, if the act or transaction is not a controlling stockholder transaction.
(2) A controlling stockholder transaction (other than a going private transaction) may not be the subject of equitable relief, or give rise to an award of damages or other sanctions, against a director or officer of the corporation or any controlling stockholder or member of a control group, by reason of a claim based on a breach of fiduciary duty by a director or officer, or a duty (as described in Section 10A-2A-6.22) of a controlling stockholder or member of a control group, if:
(i) the material facts as to the controlling stockholder transaction (including the controlling stockholder’s or control group’s interest therein) are disclosed or are known to all members of the board of directors or a committee of the board of directors to which the board of directors has expressly delegated the authority to negotiate (or oversee the negotiation of) and to reject the controlling stockholder transaction, and the controlling stockholder transaction is approved (or recommended for approval) by the affirmative vote of a majority (but no fewer than two) of the qualified directors who voted on the controlling stockholder transaction; or
(ii) the controlling stockholder transaction is conditioned, by its terms, as in effect at the time it is submitted to stockholders for their approval or ratification, on the approval of or ratification by disinterested stockholders, and the controlling stockholder transaction is approved or ratified by an informed, uncoerced, affirmative vote of a majority of the votes cast by the disinterested stockholders; or
(iii) the controlling stockholder transaction is at the relevant time fair to the corporation.
(3) A controlling stockholder transaction constituting a going private transaction may not be the subject of equitable relief, or give rise to an award of damages or other sanctions, against a director or officer of the corporation or any controlling stockholder or member of a control group by reason of a claim based on breach of fiduciary duty by a director or officer or a duty (described in Section 10A-2A-6.22) of a controlling stockholder or member of a control group, if:
(i) the controlling stockholder transaction is approved (or recommended for approval) in accordance with subsection (e)(2)(i) and approved in accordance with subsection (e)(2)(ii); or
(ii) the controlling stockholder transaction is at the relevant time fair to the corporation.
(4) No person shall be deemed a controlling stockholder unless that person satisfies the criteria in subsection (a)(4). No two or more persons that are not controlling stockholders shall be a control group unless they satisfy the criteria in subsection (a)(3).
(f) For purposes of this section, if a corporation has eliminated its board of directors under Section 10A-2A-7.32, each stockholder of that corporation shall be deemed to be a director, in addition to their capacity as a stockholder.
(Act 2019-94, §1; Act 2026-495, §1.)
(a) If a director or officer pursues or takes advantage of a corporate opportunity directly, or indirectly through or on behalf of another person, that action may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against the director, officer, or other person, in a proceeding by or in the right of the corporation on the ground that the corporate opportunity should have first been offered to the corporation, if (1) before the director, officer, or other person becomes legally obligated respecting the corporate opportunity the director or officer brings it to the attention of the corporation and either: (i) action by qualified directors disclaiming the corporation’s interest in the corporate opportunity is taken in compliance with the same procedures as are set forth in Section 10A-2A-8.60(c) or (ii) stockholders’ action disclaiming the corporation’s interest in the corporate opportunity is taken in compliance with the procedures set forth in Section 10A-2A-8.60(d), in either case as if the decision being made concerned a conflicting interest transaction, except that, rather than making “required disclosure” as defined in Section 10A-2A-8.60(a), the director or officer shall have made prior disclosure to those acting on behalf of the corporation of all material facts concerning the corporate opportunity known to the director or officer; or (2) the duty to offer the corporation the corporate opportunity has been limited or eliminated pursuant to a provision of the certificate of incorporation adopted (and where required, made effective by action of qualified directors) in accordance with Section 10A-2A-2.02(b)(6).
(b) In any proceeding seeking equitable relief or other remedies based upon an alleged improper pursuit or taking advantage of a corporate opportunity by a director or officer directly, or indirectly through or on behalf of another person, the fact that the director or officer did not employ the procedure described in subsection (a)(1)(i) or (ii) before pursuing or taking advantage of the corporate opportunity shall not create an implication that the corporate opportunity should have been first presented to the corporation or alter the burden of proof otherwise applicable to establish that the director or officer breached a duty to the corporation in the circumstances.
(Act 2026-495, §2.)
As used in this Article 9:
As used in this article, unless the context otherwise requires, the following terms have the following meanings:
(1) CONVERTED ORGANIZATION means the organization into which a converting organization converts pursuant to this article.
(2) CONVERTING CORPORATION means a converting organization that is a corporation.
(3) CONVERTING ORGANIZATION means an organization that converts into another organization pursuant to this article.
(4) GOVERNING STATUTE of an organization means the statute that governs the organization’s internal affairs.
(5) ORGANIZATION means a general partnership, including a limited liability partnership; limited partnership, including a limited liability limited partnership; limited liability company; business trust; corporation; nonprofit corporation; professional corporation; or any other person having a governing statute. The term includes domestic and foreign organizations whether or not organized for profit.
(6) ORGANIZATIONAL DOCUMENTS means:
(A) for a general partnership or foreign general partnership, its partnership agreement and if applicable, its registration as a limited liability partnership or a foreign limited liability partnership;
(B) for a limited partnership or foreign limited partnership, its certificate of formation and partnership agreement, or comparable writings as provided in its governing statute;
(C) for a limited liability company or foreign limited liability company, its certificate of formation and limited liability company agreement, or comparable writings as provided in its governing statute;
(D) for a business or statutory trust or foreign business or statutory trust, its agreement of trust and declaration of trust, or comparable writings as provided in its governing statute;
(E) for a corporation for profit or foreign corporation for profit, its certificate of incorporation, bylaws, and other agreements among its stockholders that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(F) for a nonprofit corporation or foreign nonprofit corporation, its certificate of incorporation, bylaws, and other agreements that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(G) for a professional corporation or foreign professional corporation, its certificate of incorporation, bylaws, and other agreements among its stockholders that are authorized by its governing statute, or comparable writings as provided in its governing statute; and
(H) for any other organization, the basic writings that create the organization and determine its internal governance and the relations among the persons that own it, have an interest in it, or are members of it.
(Act 2019-94, §1; Act 2021-299, §3.)
(a) An organization other than a corporation may convert to a corporation, and a corporation may convert to an organization other than a corporation pursuant to this article, and a plan of conversion, if:
(1) the governing statute of the organization that is not a corporation authorizes the conversion;
(2) the law of the jurisdiction governing the converting organization and the converted organization does not prohibit the conversion; and
(3) the converting organization and the converted organization each comply with the governing statute and organizational documents applicable to that organization in effecting the conversion.
(b) A plan of conversion must be in writing and must include:
(1) the name, type of organization, and mailing address of the principal office of the converting organization and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;
(2) the name, type of organization, and mailing address of the principal office of the converted organization after conversion;
(3) the terms and conditions of the conversion, including the manner and basis for converting interests in the converting organization into any combination of money, interests in the converted organization, and other consideration allowed in Section 10A-9A-10.02(c); and
(4) the organizational documents of the converted organization.
(c) In connection with a conversion, rights or securities of or interests in the converting organization may be exchanged for or converted into cash, property, or rights or securities of or interests in the converted organization, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, or rights or securities of or interests in another organization or may be cancelled.
(d) In addition to the requirements of subsection (a), a plan of conversion may contain any other provision not prohibited by law.
(e) The terms of a plan of conversion may be made dependent upon facts objectively ascertainable outside the plan in accordance with Section 10A-2A-1.20(c).
(f) At the time of the approval of the plan of conversion in accordance with this chapter, the plan of conversion is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of conversion that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of conversion.
(Act 2019-94, §1; Act 2025-281, §2.)
In the case of a conversion of a corporation the plan of conversion shall be adopted in the following manner:
(a) The plan of conversion shall first be adopted by the board of directors.
(b) The plan of conversion shall then be approved by the stockholders. In submitting the plan of conversion to the stockholders for their approval, the board of directors must recommend that the stockholders approve the plan, unless (i) the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make a recommendation, or (ii) Section 10A-2A-8.26 applies. If either (i) or (ii) applies, the board of directors shall inform the stockholders of the basis for its so proceeding.
(c) The board of directors may set conditions for approval of the plan of conversion by the stockholders or the effectiveness of the plan of conversion.
(d) If the approval of the stockholders is to be given at a meeting, the corporation shall notify each stockholder, regardless of whether entitled to vote, of the meeting of stockholders at which the plan of conversion is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the plan of conversion and must contain or be accompanied by a copy or summary of the plan. The notice must include or be accompanied by a copy of the organizational documents of the converted organization which are to be in writing as they will be in effect immediately after the conversion.
(e) Unless the certificate of incorporation, or the board of directors acting pursuant to subsection (c), requires a greater vote or a greater quorum, approval of the plan of conversion requires (i) the approval of the stockholders at a meeting at which a quorum exists consisting of a majority of the votes entitled to be cast on the plan, and (ii) the approval of each class or series of stock voting as a separate voting group at a meeting at which a quorum of the voting group exists consisting of a majority of the votes entitled to be cast on the plan by that voting group.
(f) If as a result of the conversion one or more stockholders of the converting corporation would become subject to personal liability, approval of the plan of conversion shall require the signing in connection with the transaction, by each stockholder who would become subject to personal liability, of a separate written consent to become subject to personal liability.
(Act 2019-94, §1.)
(a) After a plan of conversion is approved:
(1) if the converting organization is an organization formed under, or its internal affairs are governed by, the laws of this state, the converting organization shall file a statement of conversion in accordance with subsection (c), which statement of conversion must be signed in accordance with Section 10A-1-4.01 and which must include:
(A) the name, type of organization, and mailing address of the principal office of the converting organization, and its unique identifying number or other designation as assigned by the Secretary of State, if any;
(B) the date of the filing of the certificate of formation of the converting organization, if any, and all prior amendments and the filing office or offices, if any, where the certificate of formation and amendments are filed;
(C) a statement that the converting organization has been converted into the converted organization;
(D) the name and type of organization of the converted organization and the jurisdiction of its governing statute;
(E) the street and mailing address of the principal office of the converted organization;
(F) the date the conversion is effective under the governing statute of the converted organization;
(G) a statement that the conversion was approved as required by this chapter;
(H) a statement that the conversion was approved as required by the governing statute of the converted organization;
(I) a statement that a copy of the plan of conversion will be furnished by the converted organization, on request and without cost, to any owner of the converting organization; and
(J) if the converted organization is a foreign organization not authorized to conduct activities and affairs in this state, the street and mailing address of an office for the purposes of Section 10A-2A-9.15(b); and
(2) if the converted organization is a corporation, the converting organization shall deliver for filing a certificate of incorporation in accordance with subsection (d), which certificate of incorporation must include, in addition to the information required by Section 10A-2A-2.02:
(A) a statement that the corporation was converted from the converting organization;
(B) the name and type of organization of the converting organization, the jurisdiction of the converting organization’s governing statute, and the converting organization’s unique identifying number or other designation as assigned by the Secretary of State, if any; and
(C) a statement that the conversion was approved in a manner that complied with the converting organization’s governing statute.
(b) A conversion becomes effective:
(1) if the converted organization is a corporation, when the certificate of incorporation takes effect; and
(2) if the converted organization is not a corporation, as provided by the governing statute of the converted organization.
(c) If the converting organization is an organization formed under, or its internal affairs are governed by, the laws of this state, then the converting organization shall deliver for filing the statement of conversion required under subsection (a)(1) to the Secretary of State.
(d) If the converted organization is a corporation, then, the converting organization shall deliver for filing the certificate of incorporation required under subsection (a)(2) to the Secretary of State.
(e) If the converting organization is required to deliver for filing a statement of conversion and a certificate of formation to the Secretary of State, then the converting organization shall deliver for filing the statement of conversion and the certificate of formation to the Secretary of State simultaneously.
(f) After a conversion becomes effective, if the converted organization is a corporation, then, except for certified copies of the statement of conversion permitted to be delivered to the judge of probate for filing pursuant to subsection (h), all filing instruments required to be filed under this title regarding that converted organization shall be delivered for filing to the Secretary of State.
(g) If:
(1) the converting organization is a filing entity or a foreign filing entity registered to conduct activities and affairs in this state;
(2) the converted organization will be a filing entity or a foreign filing entity registered to conduct activities and affairs in this state;
(3) the name of the converting organization and the converted organization are to be the same, other than words, phrases, or abbreviations indicating the type of entity; and
(4) the name of the converted organization complies with Division A of Article 5 of Chapter 1 or Section 10A-1-7.07, as the case may be; then notwithstanding Division B of Article 5 of Chapter 1, no name reservation shall be required and the converted organization shall for all purposes of this title be entitled to utilize the name of the converting organization without any further action by the converting organization or the converted organization.
(h) A certified copy of any document required to be filed under this section may be filed in the real estate records in the office of the judge of probate in any county in which the converting organization owned real property, without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate shall, however, be entitled to collect a filing fee of five dollars ($5). Any such filing with the judge of probate shall evidence chain of title, but lack of filing shall not affect the converted organization’s title to such real property.
(i) A statement of conversion is a filing instrument under Chapter 1.
(j) The filing fees for a statement of conversion shall be as set forth in Chapter 1.
(Act 2019-94, §1.)
(a) A plan of conversion of a converting organization that is a corporation may be amended:
(1) in the same manner as the plan was approved, if the plan does not provide for the manner in which it may be amended; or
(2) in the manner provided in the plan, except that if the plan has been approved by the stockholders that were entitled to vote on, consent to, or approve of the plan, then those stockholders are entitled to vote on, consent to, or approve of any amendment of the plan that will change:
(i) the amount or kind of eligible interests or other securities, obligations, rights to acquire eligible interests or other securities, cash, other property, or any combination of the foregoing, to be received by any of the stockholders of the converting corporation under the plan;
(ii) the organizational documents of the converted organization that will be in effect immediately after the conversion becomes effective, except for changes that do not require approval of the eligible interest holders of the converted organization under its governing statute or organizational documents; or
(iii) any other terms or conditions of the plan, if the change would adversely affect the stockholders in any material respect.
(b) After a plan of conversion has been approved by a converting organization that is a corporation in the manner required by this Division B of this Article 9 and before the statement of conversion becomes effective, the plan may be abandoned by the corporation without action by its stockholders in accordance with any procedures set forth in the plan or, if no procedures are set forth in the plan, in the manner determined by the board of directors.
(c) If a conversion is abandoned after the statement of conversion has been delivered to the Secretary of State for filing and before the statement of conversion becomes effective, a statement of abandonment, signed by the converting organization, must be delivered to the Secretary of State for filing before the statement of conversion becomes effective. The statement of abandonment takes effect on filing, and the conversion is abandoned and does not become effective. The statement of abandonment must contain:
(1) the name of the converting organization;
(2) the date on which the statement of conversion was filed by the Secretary of State; and
(3) a statement that the conversion has been abandoned in accordance with this section.
(Act 2019-94, §1.)
(a) When a conversion takes effect:
(1) all property and contract rights owned by the converting organization remain vested in the converted organization without transfer, reversion, or impairment, and the title to any property vested by deed or otherwise in the converting organization shall not revert or be in any way impaired by reason of the conversion;
(2) all debts, obligations, or other liabilities of the converting organization continue as debts, obligations, or other liabilities of the converted organization and neither the rights of creditors, nor the liens upon the property of the converting organization shall be impaired by the conversion;
(3) an action or proceeding pending by or against the converting organization continues as if the conversion had not occurred and the name of the converted organization may, but need not, be substituted for the name of the converting organization in any pending action or proceeding;
(4) except as prohibited by law other than this chapter, all of the rights, privileges, immunities, powers, and purposes of the converting organization remain vested in the converted organization;
(5) except as otherwise provided in the plan of conversion, the terms and conditions of the plan of conversion take effect;
(6) except as otherwise agreed, for all purposes of the laws of this state, the converting organization shall not be required to wind up its affairs or pay its liabilities and distribute its assets, and the conversion shall not be deemed to constitute a dissolution of the converting organization;
(7) for all purposes of the laws of this state, the rights, privileges, powers, interests in property, debts, liabilities, and duties of the converting organization, shall be the rights, privileges, powers, interests in property, debts, liabilities, and duties of the converted organization, and shall not be deemed as a consequence of the conversion, to have been transferred to the converted organization;
(8) if the converted organization is a corporation, for all purposes of the laws of this state, the corporation shall be deemed to be the same organization as the converting organization, and the conversion shall constitute a continuation of the existence of the converting organization in the form of a corporation;
(9) if the converted organization is a corporation, the existence of the corporation shall be deemed to have commenced on the date the converting organization commenced its existence in the jurisdiction in which the converting organization was first created, formed, organized, incorporated, or otherwise came into being;
(10) the conversion shall not affect the choice of law applicable to matters arising prior to conversion;
(11) if the Secretary of State has assigned a unique identifying number or other designation to the converting organization and (i) the converted organization is formed pursuant to, or its internal affairs are governed by, the laws of this state, or (ii) the converted organization is, within 30 days after the effective date of the conversion, registered to transact business in this state, then that unique identifying number or other designation shall continue to be assigned to the converted organization; and
(12) the stock or eligible interests of the converting organization are reclassified into stock, eligible interests or other securities, obligations, rights to acquire stock, eligible interests or other securities, cash, or other property in accordance with the terms of the conversion, and the stockholders or interest holders of the converting organization are entitled only to the rights provided to them by those terms and to any appraisal rights they may have under the governing statute of the converting organization.
(b) A converted organization that is a foreign entity consents to the jurisdiction of the courts of this state to enforce any debt, obligation, or other liability for which the converting corporation, is liable if, before the conversion, the converting corporation was subject to suit in this state on the debt, obligation, or other liability or was subject to pay amounts to its stockholders under Article 13. If a converted organization is a foreign entity and fails to designate or maintain a registered agent, or the designated registered agent cannot with reasonable diligence be served, then service of process on that converted organization for the purposes of enforcing a debt, obligation, or other liability under this subsection may be made in the same manner and has the same consequences as provided in Section 10A-1-5.35.
(c) When the converting organization is a corporation and the conversion becomes effective, the converted organization is deemed to agree that it will promptly pay the amount, if any, to which the stockholders of the converting corporation are entitled under Article 13.
(Act 2019-94, §1.)
This article is not exclusive. This article does not preclude a corporation from converting under law other than this chapter.
(Act 2019-94, §1.)
Division B of Article 3 of Chapter 1 shall not apply to this chapter.
(Act 2023-503, §4.)
(a) A corporation may amend its certificate of incorporation at any time to add or change a provision that is required or permitted in the certificate of incorporation as of the effective date of the amendment or to delete a provision that is not required to be contained in the certificate of incorporation. Whether a provision is required or permitted in the certificate of incorporation is determined as of the effective date of the amendment.
(b) A stockholder of the corporation does not have a vested property right resulting from any provision in the certificate of incorporation, including provisions relating to management, control, capital structure, dividend entitlement, or purpose or duration of the corporation.
(Act 2019-94, §1.)
If a corporation has not yet issued stock, its board of directors, or its incorporators if it has no board of directors, may adopt one or more amendments to the corporation’s certificate of incorporation.
(Act 2019-94, §1.)
If a corporation has issued stock, an amendment to the certificate of incorporation shall be adopted in the following manner:
(a) The proposed amendment shall first be adopted by the board of directors.
(b) Except as provided in Sections 10A-2A-10.05, 10A-2A-10.07, and 10A-2A-10.08, the amendment shall then be approved by the stockholders. In submitting the proposed amendment to the stockholders for approval, the board of directors shall recommend that the stockholders approve the amendment, unless (i) the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make a recommendation, or (ii) Section 10A-2A-8.26 applies. If either (i) or (ii) applies, the board of directors must inform the stockholders of the basis for its so proceeding.
(c) The board of directors may set conditions for the approval of the amendment by the stockholders or the effectiveness of the amendment.
(d) If the amendment is required to be approved by the stockholders, and the approval is to be given at a meeting, the corporation shall notify each stockholder, regardless of whether entitled to vote, of the meeting of stockholders at which the amendment is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the amendment. The notice must contain or be accompanied by a copy of the amendment.
(e) Unless the certificate of incorporation, or the board of directors acting pursuant to subsection (c), requires a greater vote or a greater quorum, approval of the amendment requires the approval of the stockholders at a meeting at which a quorum consisting of a majority of the votes entitled to be cast on the amendment exists, and, if any class or series of stock is entitled to vote as a separate group on the amendment, except as provided in Section 10A-2A-10.04(c), the approval of each separate voting group at a meeting at which a quorum of the voting group exists consisting of a majority of the votes entitled to be cast on the amendment by that voting group.
(f) If as a result of an amendment of the certificate of incorporation one or more stockholders of a corporation would become subject to new personal liability, approval of the amendment requires the signing in connection with the amendment, by each stockholder who will become subject to new personal liability, of a separate written consent to become subject to new personal liability, unless in the case of a stockholder that already has personal liability the terms and conditions of the new personal liability (i) are substantially identical to those of the existing personal liability, or (ii) are substantially identical to those of the existing personal liability (other than changes that eliminate or reduce existing personal liability).
(g) For purposes of subsection (f) and Section 10A-2A-10.09, “new personal liability” means personal liability of a person resulting from an amendment of the certificate of incorporation if (i) the person did not have personal liability before the amendment becomes effective, or (ii) the person had personal liability before the amendment becomes effective, the terms and conditions of which are changed when the amendment becomes effective.
(Act 2019-94, §1.)
(a) The holders of the outstanding stock of a class are entitled to vote as a separate voting group (if stockholder voting is otherwise required by this chapter) on a proposed amendment to the certificate of incorporation if the amendment would:
(1) effect an exchange or reclassification of all or part of the stock of the class into stock of another class;
(2) effect an exchange or reclassification, or create the right of exchange, of all or part of the stock of another class into stock of the class;
(3) change the rights, preferences, or limitations of all or part of the stock of the class;
(4) change the stock of all or part of the class into a different number of shares of stock of the same class;
(5) create a new class of stock having rights or preferences with respect to distributions that are prior or superior to the stock of the class;
(6) increase the rights, preferences, or number of authorized shares of stock of any class that, after giving effect to the amendment, have rights or preferences with respect to distributions that are prior or superior to the stock of the class;
(7) limit or deny an existing preemptive right of all or part of the stock of the class; or
(8) cancel or otherwise affect rights to distributions that have accumulated but not yet been authorized on all or part of the stock of the class.
(b) If a proposed amendment would affect a series of a class of stock in one or more of the ways described in subsection (a), the holders of stock of that series are entitled to vote as a separate voting group on the proposed amendment.
(c) If a proposed amendment that entitles the holders of two or more classes or series of stock to vote as separate voting groups under this section would affect those two or more classes or series in the same or a substantially similar way, the holders of stock of all the classes or series so affected shall vote together as a single voting group on the proposed amendment, unless otherwise provided in the certificate of incorporation or added as a condition by the board of directors pursuant to Section 10A-2A-10.03(c).
(d) A class or series of stock is entitled to the voting rights granted by this section even if the certificate of incorporation provides that the stock is nonvoting stock.
(Act 2019-94, §1.)
Unless the certificate of incorporation provides otherwise, a corporation’s board of directors may adopt amendments to the corporation’s certificate of incorporation without stockholder approval:
(a) to extend the duration of the corporation if it was incorporated at a time when limited duration was required by law;
(b) to delete the names and addresses of the incorporators or initial directors;
(c) to delete the name and address of the initial registered agent or registered office, if a statement of change is on file with the Secretary of State;
(d) if the corporation has only one class of stock outstanding:
(1) to change each issued and unissued authorized share of stock of the class into a greater number of whole shares of stock of that class; or
(2) to increase the number of authorized shares of stock of the class to the extent necessary to permit the issuance of stock as a stock dividend;
(e) to change the corporate name, provided that the name complies with Article 5 of Chapter 1;
(f) to reflect a reduction in authorized stock, as a result of the operation of Section 10A-2A-6.31(a)(2), when the corporation has acquired its own stock and the certificate of incorporation prohibits the reissue of the acquired stock;
(g) to delete a class of stock from the certificate of incorporation, as a result of the operation of Section 10A-2A-6.31(a)(2), when there is no remaining stock of the class because the corporation has acquired all stock of the class and the certificate of incorporation prohibits the reissue of the acquired stock; or
(h) to take actions expressly permitted by Section 10A-2A-6.02 to be made without stockholder approval.
(Act 2019-94, §1; Act 2024-413, §1.)
(a) After an amendment to the certificate of incorporation has been adopted and approved in the manner required by this chapter and by the certificate of incorporation, the corporation shall deliver to the Secretary of State for filing a certificate of amendment, which must set forth:
(1) the name of the corporation;
(2) the text of each amendment adopted, or the information required by Section 10A-2A-1.20(c)(5);
(3) if an amendment provides for an exchange, reclassification, or cancellation of issued stock, provisions for implementing the amendment if not contained in the amendment itself, (which may be made dependent upon facts objectively ascertainable outside the certificate of amendment in accordance with Section 10A-2A-1.20(c)(5));
(4) the date of each amendment’s adoption;
(5) if an amendment:
(i) was adopted by the incorporators or board of directors without stockholder approval, a statement that the amendment was duly adopted by the incorporators or by the board of directors, as the case may be, and that stockholder approval was not required;
(ii) required approval by the stockholders, a statement that the amendment was duly approved by the stockholders in the manner required by this chapter and by the certificate of incorporation; or
(iii) is being filed pursuant to Section 10A-2A-1.20(c)(5), a statement to that effect; and
(6) the unique identifying number or other designation as assigned by the Secretary of State.
(b) A certificate of amendment shall take effect at the effective date determined in accordance with Article 4 of Chapter 1.
(Act 2019-94, §1; Act 2021-299, §3; Act 2023-503, §3.)
(a) A corporation’s board of directors may restate its certificate of incorporation at any time, without stockholder approval, to consolidate all amendments into a single document. The restated certificate of incorporation may amend the certificate of incorporation with those amendments that the board of directors is permitted to adopt without stockholder approval in accordance with Sections 10A-2A-10.02 and 10A-2A-10.05. The restated certificate of incorporation may also amend the certificate of incorporation with those amendments that the stockholders must approve in accordance with Section 10A-2A-10.03.
(b) If the restated certificate of incorporation includes one or more new amendments that require stockholder approval, the amendments shall be adopted and approved as provided in Section 10A-2A-10.03.
(c) A corporation that restates its certificate of incorporation shall deliver to the Secretary of State for filing a certificate of restatement setting forth:
(1) the name of the corporation;
(2) the text of the restated certificate of incorporation;
(3) a statement that the restated certificate of incorporation consolidates all amendments into a single document;
(4) if a new amendment is included in the restated certificate of incorporation, the statements required under Section 10A-2A-10.06 with respect to the new amendment; and
(5) the unique identifying number or other designation as assigned by the Secretary of State.
(d) The duly adopted restated certificate of incorporation supersedes the original certificate of incorporation and all amendments to the certificate of incorporation.
(e) A restated certificate of incorporation may omit the information that may be deleted pursuant to Section 10A-2A-10.05.
(Act 2019-94, §1; Act 2021-299, §3; Act 2023-503, §3; Act 2024-413, §1.)
(a) A corporation’s certificate of incorporation may be amended without action by the board of directors or stockholders to carry out a plan of reorganization ordered or decreed by a court of competent jurisdiction under the authority of a law of the United States if the certificate of incorporation after the amendment only contains provisions required or permitted by Section 10A-2A-2.02.
(b) The individual or individuals designated by the court shall deliver to the Secretary of State for filing a certificate of amendment setting forth:
(1) the name of the corporation;
(2) the text of each amendment approved by the court;
(3) the date of the court’s order or decree approving the certificate of amendment;
(4) the title of the reorganization proceeding in which the order or decree was entered;
(5) a statement that the court had jurisdiction of the proceeding under federal statute; and
(6) the unique identifying number or other designation as assigned by the Secretary of State.
(c) Stockholders of a corporation undergoing reorganization do not have appraisal rights except as and to the extent provided in the reorganization plan.
(d) This section does not apply after entry of a final decree in the reorganization proceeding even though the court retains jurisdiction of the proceeding for limited purposes unrelated to consummation of the reorganization plan.
(Act 2019-94, §1; Act 2021-299, §3; Act 2023-503, §3; Act 2024-413, §1.)
(a) An amendment to the certificate of incorporation does not affect a cause of action existing against or in favor of the corporation, a proceeding to which the corporation is a party, or the existing rights of persons other than the stockholders. An amendment changing a corporation’s name does not affect a proceeding brought by or against the corporation in its former name.
(b) A stockholder who becomes subject to new personal liability in respect of the corporation as a result of an amendment to the certificate of incorporation shall have that new personal liability only in respect of interest holder liabilities that arise after the amendment becomes effective.
(c) Except as otherwise provided in the certificate of incorporation of the corporation, the personal liability of a stockholder who had personal liability in respect of the corporation before the amendment becomes effective and has new personal liability after the amendment becomes effective shall be as follows:
(1) The amendment does not discharge that prior personal liability with respect to any interest holder liabilities that arose before the amendment becomes effective.
(2) The provisions of the certificate of incorporation relating to personal liability as in effect immediately prior to the amendment shall continue to apply to the collection or discharge of any interest holder liabilities preserved by subsection (c)(1), as if the amendment had not occurred.
(3) The stockholder shall have the rights of contribution from other persons as are provided by the certificate of incorporation relating to personal liability as in effect immediately prior to the amendment with respect to any interest holder liabilities preserved by subsection (c)(1), as if the amendment had not occurred.
(4) The stockholder shall not, by reason of any prior personal liability, have personal liability with respect to any interest holder liabilities that arise after the amendment becomes effective.
(Act 2019-94, §1.)
(a) A restated certificate of incorporation takes effect when the filing of the restated certificate of incorporation takes effect as provided by Article 4 of Chapter 1.
(b) On the date and time the restated certificate of incorporation takes effect, the original certificate of incorporation and each prior amendment or restatement of the certificate of incorporation is superseded and the restated certificate of incorporation is the effective certificate of incorporation.
(c) Section 10A-2A-10.09 applies to an amendment effected by a restated certificate of incorporation.
(Act 2023-503, §4.)
(a) A corporation’s stockholders may amend or repeal the corporation’s bylaws.
(b) A corporation’s board of directors may amend or repeal the corporation’s bylaws, unless:
(1) the certificate of incorporation, Section 10A-2A-10.21 or, if applicable, Section 10A-2A-10.22, reserves that power exclusively to the stockholders in whole or part; or
(2) except as provided in Section 10A-2A-2.05(d), the stockholders in amending, repealing, or adopting a bylaw expressly provide that the board of directors may not amend, repeal, or adopt that bylaw.
(c) A stockholder of the corporation does not have a vested property right resulting from any provision in the bylaws.
(Act 2019-94, §1.)
(a) A bylaw that increases a quorum or voting requirement for the board of directors or that requires a meeting of stockholders to be held at a place may be amended or repealed:
(1) if originally adopted by the stockholders, only by the stockholders, unless the bylaw otherwise provides; or
(2) if adopted by the board of directors, either by the stockholders or by the board of directors.
(b) A bylaw adopted or amended by the stockholders that increases a quorum or voting requirement for the board of directors may provide that it can be amended or repealed only by a specified vote of either the stockholders or the board of directors.
(c) Action by the board of directors under subsection (a) to amend or repeal a bylaw that changes a quorum or voting requirement for the board of directors shall meet the same quorum requirement and be adopted by the same vote required to take action under the quorum and voting requirement then in effect or proposed to be adopted, whichever is greater.
(Act 2019-94, §1.)
(a) Unless the certificate of incorporation (i) specifically prohibits the adoption of a bylaw pursuant to this section, (ii) alters the vote specified in Section 10A-2A-7.28(a), or (iii) provides for cumulative voting, a corporation may elect in its bylaws to be governed in the election of directors as follows:
(1) each vote entitled to be cast may be voted for or against up to that number of candidates that is equal to the number of directors to be elected, or a stockholder may indicate an abstention, but without cumulating the votes;
(2) to be elected, a nominee shall have received a plurality of the votes cast by holders of stock entitled to vote in the election at a meeting at which a quorum is present, provided that a nominee who is elected but receives more votes against than for election shall serve as a director for a term that shall terminate on the date that is the earlier of (i) 90 days from the date on which the voting results are determined pursuant to Section 10A-2A-7.29(b)(5) or (ii) the date on which an individual is selected by the board of directors to fill the office held by that director, which selection shall be deemed to constitute the filling of a vacancy by the board of directors to which Section 10A-2A-8.10 applies. Subject to subsection (a)(3), a nominee who is elected but receives more votes against than for election shall not serve as a director beyond the 90-day period referenced above; and
(3) the board of directors may select any qualified individual to fill the office held by a director who received more votes against than for election.
(b) Subsection (a) does not apply to an election of directors by a voting group if (i) at the expiration of the time fixed under a provision requiring advance notification of director candidates, or (ii) absent that provision, at a time fixed by the board of directors which is not more than 14 days before notice is given of the meeting at which the election is to occur, there are more candidates for election by the voting group than the number of directors to be elected, one or more of whom are properly proposed by stockholders. An individual shall not be considered a candidate for purposes of this subsection if the board of directors determines before the notice of meeting is given that the individual’s candidacy does not create a bona fide election contest.
(c) A bylaw electing to be governed by this section may be repealed:
(1) if originally adopted by the stockholders, only by the stockholders, unless the bylaw otherwise provides;
(2) if adopted by the board of directors, by the board of directors or the stockholders.
(Act 2019-94, §1.)
As used in this article, unless the context otherwise requires, the following terms mean:
(1) ACQUIRED ENTITY means the corporation or foreign corporation that will have all of one or more classes or series of its stock acquired in a stock exchange.
(2) ACQUIRING ENTITY means the corporation or foreign corporation that will acquire all of one or more classes or series of stock of the acquired entity in a stock exchange.
(3) CONSTITUENT CORPORATION means a constituent organization that is a corporation.
(4) CONSTITUENT ORGANIZATION means an organization that is party to a merger under this article.
(5) GOVERNING STATUTE of an organization means the statute that governs the organization’s internal affairs.
(6) ORGANIZATION means a general partnership, including a limited liability partnership; limited partnership, including a limited liability limited partnership; limited liability company; business trust; corporation; nonprofit corporation; professional corporation; or any other person having a governing statute. The term includes domestic and foreign organizations whether or not organized for profit.
(7) ORGANIZATIONAL DOCUMENTS means:
(A) for a general partnership or foreign general partnership, its partnership agreement and if applicable, its registration as a limited liability partnership or a foreign limited liability partnership;
(B) for a limited partnership or foreign limited partnership, its certificate of formation and partnership agreement, or comparable writings as provided in its governing statute;
(C) for a limited liability company or foreign limited liability company, its certificate of formation and limited liability company agreement, or comparable writings as provided in its governing statute;
(D) for a business or statutory trust or foreign business or statutory trust its agreement of trust and declaration of trust, or comparable writings as provided in its governing statute;
(E) for a corporation or foreign corporation, its certificate of incorporation, bylaws, and other agreements among its stockholders that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(F) for a nonprofit corporation or foreign nonprofit corporation, its certificate of incorporation, bylaws, and other agreements that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(G) for a professional corporation or foreign professional corporation, its certificate of incorporation, bylaws, and other agreements among its stockholders that are authorized by its governing statute, or comparable writings as provided in its governing statute; and
(H) for any other organization, the basic writings that create the organization and determine its internal governance and the relations among the persons that own it, have an interest in it, or are members of it.
(8) NEW PERSONAL LIABILITY means personal liability of a person, resulting from a merger or stock exchange, that is (i)(A) in respect of an entity which is different from the entity in which the person held stock or eligible interests immediately before the merger became effective, or (B) in respect of an entity which is different from the entity in which the person held stock immediately before the stock exchange became effective; or (ii) in respect of the same entity as the one in which the person held stock or eligible interests immediately before the merger became effective if (A) the person did not have personal liability immediately before the merger became effective, or (B) the person had personal liability immediately before the merger became effective, the terms and conditions of which were changed when the merger became effective; or (iii) in respect of the same entity as the one in which the person held stock immediately before the stock exchange became effective if (A) the person did not have personal liability immediately before the stock exchange became effective, or (B) the person had personal liability immediately before the stock exchange became effective, the terms and conditions of which were changed when the stock exchange became effective.
(9) PLAN OF MERGER. Except as set forth in Section 10A-2A-11.02(g), a plan of merger, whether referred to as a plan of merger, an agreement of merger, a merger agreement, a plan and agreement of merger, an agreement and plan of merger, or otherwise, means a writing described in Section 10A-2A-11.02 and includes any agreement, instrument, or other document referenced therein or associated therewith that sets forth the terms and conditions of the merger.
(10) SURVIVING ORGANIZATION means an organization into which one or more other organizations are merged under this article, whether the organization pre-existed the merger or was created pursuant to the merger.
(Act 2019-94, §1; Act 2021-299, §3; Act 2025-281, §2.)
(a) A corporation may merge with one or more other constituent organizations pursuant to this article, and a plan of merger, if:
(1) the governing statute of each of the other organizations authorizes the merger;
(2) the merger is not prohibited by the law of a jurisdiction that enacted any of those governing statutes; and
(3) each of the other organizations complies with its governing statute in effecting the merger.
(b) A plan of merger must be in writing and must include:
(1) the name, type of organization, and mailing address of the principal office of each constituent organization, the jurisdiction of the governing statute of each constituent organization, and the respective unique identifying number or other designation as assigned by the Secretary of State, if any, of each constituent organization;
(2) the name, type of organization, and mailing address of the principal office of the surviving organization, the unique identifying number or other designation as assigned by the Secretary of State, if any, of the surviving organization, the jurisdiction of the governing statute of the surviving organization, and, if the surviving organization is created pursuant to the merger, a statement to that effect;
(3) the terms and conditions of the merger, including the manner and basis for converting the stock or eligible interests in each constituent organization into any combination of money, stock, eligible interests in the surviving organization, and other consideration as allowed by subsection (c);
(4) if the surviving organization is to be created pursuant to the merger, the surviving organization’s organizational documents; and
(5) if the surviving organization is not to be created pursuant to the merger, any amendments to be made by the merger to the surviving organization’s organizational documents.
(c) In connection with a merger, rights, securities, stock, or eligible interests, if any, in a constituent organization may be exchanged for or converted into cash, property, rights, securities, stock, or eligible interests, if any, in the surviving organization, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, rights, securities, stock, or eligible interests, if any, in another organization, or may be cancelled.
(d) In addition to the requirements of subsection (b), a plan of merger may:
(1) provide that (i) a constituent organization or any other party to the plan of merger that fails to perform its obligations under the plan of merger in accordance with the terms and conditions of the plan of merger, or that otherwise fails to comply with the terms and conditions of the plan of merger, in each case, required to be performed or complied with prior to the time the merger becomes effective, or that otherwise fails to consummate, or fails to cause the consummation of, the merger (whether prior to a specified date, upon satisfaction or, to the extent permitted by law, waiver of all conditions to consummation set forth in the plan of merger, or otherwise) shall be subject, in addition to any other remedies available at law or in equity, to the penalties or consequences as are set forth in the plan of merger (which penalties or consequences may include an obligation to pay to the other party or parties to the plan of merger an amount representing, or based on the loss of, any premium or other economic entitlement the stockholders or owners, as the case may be, of the other party would be entitled to receive pursuant to the terms of the plan of merger if the merger were consummated in accordance with the terms of the plan of merger) and (ii) if, pursuant to the terms of the plan of merger, a corporation is entitled to receive payment from another party to the plan of merger of any amount representing a penalty or consequence (as specified in clause (i) of this Section 10A-2A-11.02(d)(1)), the corporation shall be entitled to enforce the other party’s payment obligation and, upon receipt of any payment, shall be entitled to retain the amount of the payment so received;
(2) provide (i) for the appointment, at or after the time at which the plan of merger is adopted by the stockholders of a constituent corporation in accordance with the requirements of Section 10A-2A-11.04, of one or more persons (which may include the surviving or resulting entity or any officer, manager, representative or agent thereof) as representative of the stockholders of a constituent corporation of this state, including those whose shares of capital stock shall be cancelled, converted, or exchanged in the merger, and for the delegation to that person or persons of the sole and exclusive authority to take action on behalf of the stockholders pursuant to the plan of merger, including taking such actions as the representative determines to enforce (including by entering into settlements with respect to) the rights of the stockholders under the plan of merger, on the terms and subject to the conditions set forth in the plan of merger, (ii) that any appointment pursuant to clause (i) of this Section 10A-2A-11.02(d)(2) shall be irrevocable and binding on all stockholders from and after the adoption of the plan of merger by the requisite vote of the stockholders pursuant to Section 10A-2A-11.04, and (iii) that any provision adopted pursuant to this Section 10A-2A-11.02(d)(2) may not be amended after the merger has become effective or may be amended only with the consent or approval of persons specified in the plan of merger; and
(3) contain any other provision not prohibited by law.
(e) Terms of a plan of merger may be made dependent on facts objectively ascertainable outside the plan in accordance with Section 10A-2A-1.20(c).
(f) A plan of merger may be amended only with the consent of each constituent organization, except as provided in the plan. A domestic constituent organization may approve an amendment to a plan:
(1) in the same manner as the plan was approved, if the plan does not provide for the manner in which it may be amended; or
(2) in the manner provided in the plan, except that if the plan has been approved by the stockholders, members, or interest holders that were entitled to vote on, consent to, or approve of, the plan, then those stockholders, members, or interest holders are entitled to vote on, consent to, or approve of any amendment of the plan that will change:
(i) the amount or kind of stock or other securities, eligible interests, obligations, rights to acquire stock, other securities or eligible interests, cash, or other property to be received under the plan by the stockholders, members, or interest holders of a constituent organization;
(ii) the certificate of incorporation of any corporation, foreign corporation, nonprofit corporation, foreign nonprofit corporation or the organizational documents of any unincorporated entity or foreign unincorporated entity, that will be the surviving organization, except for changes permitted by Section 10A-2A-10.05 or by comparable provisions of the governing statute of the foreign corporation, nonprofit corporation, foreign nonprofit corporation, unincorporated entity, or foreign unincorporated entity; or
(iii) any of the other terms or conditions of the plan if the change would adversely affect the stockholders, members, or interest holders in any material respect.
(g) At the time of the approval of the plan of merger in accordance with this chapter, the plan of merger is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of merger that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of merger.
(Act 2019-94, §1; Act 2023-503, §3; Act 2025-281, §2.)
(a) By complying with this Article 11:
(1) a corporation may acquire all of the stock of one or more classes or series of stock, of another corporation or foreign corporation, in exchange for stock or other securities, obligations, rights to acquire stock or other securities, cash, other property, or any combination of the foregoing, pursuant to a plan of stock exchange; or
(2) all of the stock of one or more classes or series of stock of a corporation may be acquired by another corporation or foreign corporation, in exchange for stock or other securities, obligations, rights to acquire stock or other securities, cash, other property, or any combination of the foregoing, pursuant to a plan of stock exchange.
(b) A foreign corporation may be the acquired entity in a stock exchange only if the stock exchange is permitted by the governing statute of that foreign corporation.
(c) The plan of stock exchange must include:
(1) the name of each corporation or foreign corporation the stock of which will be acquired, the name of the corporation or foreign corporation that will acquire that stock, and the respective unique identifying numbers or other designations as assigned by the Secretary of State, if any, of the corporation or foreign corporation;
(2) the terms and conditions of the stock exchange;
(3) the manner and basis of exchanging stock of a corporation or foreign corporation, the stock of which will be acquired under the stock exchange for stock or other securities, obligations, rights to acquire stock, other securities, cash, other property, or any combination of the foregoing; and
(4) any other provisions required by the governing statute governing the acquired entity or its certificate of incorporation or organizational documents.
(d) Terms of a plan of stock exchange may be made dependent on facts objectively ascertainable outside the plan in accordance with Section 10A-2A-1.20(c).
(e) A plan of stock exchange may be amended only with the consent of each party to the stock exchange, except as provided in the plan. A corporation may approve an amendment to a plan:
(1) in the same manner as the plan was approved, if the plan does not provide for the manner in which it may be amended; or
(2) in the manner provided in the plan, except that if the plan has been approved by the stockholders that were entitled to vote on, consent to, or approve of the plan then those stockholders are entitled to vote on, consent to, or approve of any amendment of the plan that will change:
(i) the amount or kind of stock or other securities, obligations, rights to acquire stock, other securities, cash, or other property to be received under the plan by the stockholders of the acquired entity; or
(ii) any of the other terms or conditions of the plan if the change would adversely affect the stockholders in any material respect.
(f) At the time of the approval of the plan of stock exchange in accordance with this chapter, the plan of stock exchange is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of stock exchange that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of stock exchange.
(Act 2019-94, §1; Act 2025-281, §2.)
In the case of a corporation that is a constituent organization or the acquired entity in a stock exchange, the plan of merger or stock exchange shall be adopted in the following manner:
(a) The plan of merger or stock exchange shall first be adopted by the board of directors.
(b) Except as provided in subsections (h), (j), and (l) and in Section 10A-2A-11.05, the plan of merger or stock exchange shall then be approved by the stockholders. In submitting the plan of merger or stock exchange to the stockholders for approval, the board of directors shall recommend that the stockholders approve the plan or, in the case of an offer referred to in subsection (j)(2), that the stockholders tender their stock to the offeror in response to the offer, unless (i) the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make a recommendation or (ii) Section 10A-2A-8.26 applies. If either (i) or (ii) applies, the board of directors shall inform the stockholders of the basis for its so proceeding.
(c) The board of directors may set conditions for the approval of the plan of merger or stock exchange by the stockholders or the effectiveness of the plan of merger or stock exchange.
(d) If the plan of merger or stock exchange is required to be approved by the stockholders, and if the approval is to be given at a meeting, the corporation shall notify each stockholder, regardless of whether entitled to vote, of the meeting of stockholders at which the plan is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the plan and must contain or be accompanied by a copy or summary of the plan. If the corporation is to be merged into an existing corporation, foreign corporation, or eligible entity, the notice must also include or be accompanied by a copy or summary of the certificate of incorporation and bylaws or the organizational documents of that corporation, foreign corporation, or eligible entity. If the corporation is to be merged with a corporation, foreign corporation, or eligible entity and a new corporation, foreign corporation, or eligible entity is to be created pursuant to the merger, the notice must include or be accompanied by a copy or a summary of the certificate of incorporation and bylaws or the organizational documents of the new corporation, foreign corporation, or eligible entity.
(e) Unless the certificate of incorporation, or the board of directors acting pursuant to subsection (c), requires a greater vote or a greater quorum, approval of the plan of merger or stock exchange requires the approval of the stockholders at a meeting at which a quorum exists consisting of a majority of the votes entitled to be cast on the plan, and, if any class or series of stock is entitled to vote as a separate group on the plan of merger or stock exchange, the approval of each separate voting group at a meeting at which a quorum of the voting group is present consisting of a majority of the votes entitled to be cast on the merger or stock exchange by that voting group.
(f) Subject to subsection (g), separate voting by voting groups is required:
(1) on a plan of merger, by each class or series of stock that:
(i) are to be converted under the plan of merger into stock, other securities, eligible interests, obligations, rights to acquire stock, other securities or eligible interests, cash, other property, or any combination of the foregoing; or
(ii) are entitled to vote as a separate group on a provision in the plan that constitutes a proposed amendment to the certificate of incorporation of a surviving corporation that requires action by separate voting groups under Section 10A-2A-10.04;
(2) on a plan of stock exchange, by each class or series of stock included in the exchange, with each class or series constituting a separate voting group; and
(3) on a plan of merger or stock exchange, if the voting group is entitled under the certificate of incorporation to vote as a voting group to approve a plan of merger or stock exchange, respectively.
(g) The certificate of incorporation may expressly limit or eliminate the separate voting rights provided in subsection (f)(1)(i) and subsection (f)(2) as to any class or series of stock, except when the plan of merger or stock exchange (i) includes what is or would be in effect an amendment subject to subsection (f)(1)(ii), and (ii) will not effect a substantive business combination.
(h) Unless the certificate of incorporation otherwise provides, approval by the corporation’s stockholders of a plan of merger is not required if:
(1) the corporation will survive the merger;
(2) except for amendments permitted by Section 10A-2A-10.05, its certificate of incorporation will not be changed; and
(3) each stockholder of the corporation whose stock was outstanding immediately before the effective date of the merger or stock exchange will hold the same number of shares of stock, with identical preferences, rights and limitations, immediately after the effective date of the merger.
(i) If as a result of a merger or stock exchange one or more stockholders of a corporation will have new personal liability with respect to the surviving organization or the acquiring entity, approval of the plan of merger or stock exchange will be ineffective without the consent to the plan of merger or stock exchange of the stockholder who will have new personal liability. A stockholder does not give consent required in this subsection (i) merely by consenting to a provision in the certification of incorporation, the bylaws, or an agreement of the stockholders, that allows for a plan of merger or stock exchange to impose new personal liability on that stockholder without that stockholder’s consent at the time of the plan of merger or stock exchange.
(j) Unless the certificate of incorporation otherwise provides, approval by the stockholders of a plan of merger or stock exchange is not required if:
(1) the plan of merger or stock exchange expressly (i) permits or requires the merger or stock exchange to be effected under this subsection and (ii) provides that, if the merger or stock exchange is to be effected under this subsection, the merger or stock exchange will be effected as soon as practicable following the satisfaction of the requirement set forth in subsection (j)(6);
(2) another party to the merger, the acquiring entity in the stock exchange, or a parent of another party to the merger or the acquiring entity in the stock exchange, makes an offer to purchase, on the terms provided in the plan of merger or stock exchange, any and all of the outstanding stock of the corporation that, absent this subsection, would be entitled to vote on the plan of merger or stock exchange, except that the offer may exclude stock of the corporation that is owned at the commencement of the offer by the corporation, the offeror, or any parent of the offeror, or by any wholly owned subsidiary of any of the foregoing;
(3) the offer discloses that the plan of merger or stock exchange provides that the merger or stock exchange will be effected as soon as practicable following the satisfaction of the requirement set forth in subsection (j)(6) and that the stock of the corporation that is not tendered in response to the offer will be treated as set forth in subsection (j)(8);
(4) the offer remains open for at least 10 days;
(5) the offeror purchases all stock properly tendered in response to the offer and not properly withdrawn;
(6) the stock listed below is collectively entitled to cast at least the minimum number of votes on the merger or stock exchange that, absent this subsection, would be required by this Article 11 and by the certificate of incorporation for the approval of the merger or stock exchange by the stockholders, and by any other voting group entitled to vote on the merger or stock exchange at a meeting at which all stock entitled to vote on the approval was present and voted, and with the consent of the stockholders required under Section 10A-2A-11.04(i):
(i) stock purchased by the offeror in accordance with the offer;
(ii) stock otherwise owned by the offeror or by any parent of the offeror or any wholly owned subsidiary of any of the foregoing; and
(iii) stock subject to an agreement that the stock is to be transferred, contributed, or delivered to the offeror, any parent of the offeror, or any wholly owned subsidiary of any of the foregoing in exchange for stock or eligible interests in the offeror, parent, or subsidiary;
(7) the offeror or a wholly owned subsidiary of the offeror merges with or into, or effects a stock exchange in which it acquires stock of, the corporation; and
(8) each outstanding share of stock of each class or series of stock of the corporation that the offeror is offering to purchase in accordance with the offer, and that is not purchased in accordance with the offer, is to be converted in the merger into, or into the right to receive, or is to be exchanged in the stock exchange for, or for the right to receive, the same amount and kind of securities, eligible interests, obligations, rights, cash, or other property to be paid or exchanged in accordance with the offer for each share of stock of that class or series of stock that is tendered in response to the offer, except that stock of the corporation that is owned by the corporation or that are described in clause (ii) or (iii) of subsection (j)(6) need not be converted into or exchanged for the consideration described in this subsection (j)(8).
(k) As used in subsection (j):
(1) “offer” means the offer referred to in subsection (j)(2);
(2) “offeror” means the person making the offer;
(3) “parent” of an entity means a person that owns, directly or indirectly (through one or more wholly owned subsidiaries), all of the outstanding stock of or eligible interests in that entity;
(4) stock tendered in response to the offer shall be deemed to have been “purchased” in accordance with the offer at the earliest time as of which (i) the offeror has irrevocably accepted that stock for payment, and (ii) either (A) in the case of stock represented by certificates, the offeror, or the offeror’s designated depository or other agent, has physically received the certificates representing that stock, or (B) in the case of stock without certificates, that stock has been transferred into the account of the offeror or its designated depository or other agent, or an agent’s message relating to that stock has been received by the offeror or its designated depository or other agent; and
(5) “wholly owned subsidiary” of a person means an entity of or in which that person owns, directly or indirectly (through one or more wholly owned subsidiaries), all of the outstanding stock or eligible interests.
(l) Unless the certificate of incorporation otherwise provides,
(1) approval of a plan of stock exchange by the stockholders of a corporation is not required if the corporation is the acquiring entity in the stock exchange; and
(2) stock not to be exchanged under the plan of stock exchange is not entitled to vote on the plan.
(Act 2019-94, §1.)
(a) A domestic or foreign parent entity that owns stock of a corporation which carries at least 90 percent of the voting power of each class and series of the outstanding stock of that subsidiary corporation that has voting power may (i) merge that subsidiary corporation into itself (if it is a corporation, foreign corporation, or eligible entity), (ii) merge that subsidiary corporation into another corporation, foreign corporation, or eligible entity in which the parent entity owns at least 90 percent of the voting power of each class and series of the outstanding stock or eligible interests which have voting power, or (iii) merge itself (if it is a corporation, foreign corporation, or eligible entity) into that subsidiary corporation, in any case without the approval of the board of directors or stockholders of that subsidiary corporation, unless the certificate of incorporation or organizational documents of the parent entity or the certificate of incorporation of that subsidiary corporation otherwise provide. The certificate of incorporation, organizational documents, and the governing statute of the parent entity and the other corporation, foreign corporation, or eligible entity into which the parent entity intends to merge the subsidiary corporation under clause (ii) of this subsection shall determine the necessary consent or approval required for the merger. Section 10A-2A-11.04(i) applies to a merger under this section. The statement of merger relating to a merger under this section does not need to be signed by the subsidiary corporation.
(b) A parent entity shall, within 10 days after the effective date of a merger approved under subsection (a), notify each of the subsidiary corporation’s stockholders that the merger has become effective.
(c) Except as provided in subsections (a) and (b), a merger between a parent entity and a subsidiary corporation shall, as to the subsidiary corporation and a parent entity that is a corporation, be governed by the provisions of Article 11 applicable to mergers generally, and as to a parent entity that is not a corporation, be governed by the organizational documents and governing statute of that parent entity.
(Act 2019-94, §1.)
(a) After a plan of merger has been adopted and approved as required by this article, then a statement of merger shall be signed by each party to the merger except as provided in Section 10A-2A-11.05(a). The statement of merger must set forth:
(1) the name, type of organization, and mailing address of the principal office of each constituent organization, the jurisdiction of the governing statute of each constituent organization, and the respective unique identifying number or other designation as assigned by the Secretary of State, if any, of each constituent organization;
(2) the name, type of organization, and mailing address of the principal office of the surviving organization, the unique identifying number or other designation as assigned by the Secretary of State, if any, of the surviving organization, the jurisdiction of the governing statute of the surviving organization, and, if the surviving organization is created pursuant to the merger, a statement to that effect;
(3) the date the merger is effective under the governing statute of the surviving organization;
(4) if the surviving organization is to be created pursuant to the merger:
(A) if it will be a corporation, the corporation’s certificate of incorporation; or
(B) if it will be an organization other than a corporation, any organizational document that creates the organization that is required to be in a public writing or in the case of a limited liability partnership, its statement of limited liability partnership;
(5) if the surviving organization exists before the merger, any amendments provided for in the plan of merger for the organizational document that created the organization that are in a public writing;
(6) a statement as to each constituent organization that the merger was approved as required by the organization’s governing statute;
(7) if the surviving organization is a foreign organization not authorized to conduct activities and affairs in this state, the street and mailing address of an office for the purposes of Section 10A-2A-11.07(c);
(8) any additional information required by the governing statute of any constituent organization;
(9) if the plan of merger required approval by the stockholders of a corporation that is a constituent organization, a statement that the plan was duly approved by the stockholders and, if voting by any separate voting group was required, by each separate voting group, in the manner required by this chapter and the certificate of incorporation;
(10) if the plan of merger did not require approval by the stockholders of a corporation that is a constituent organization, a statement to that effect; and
(11) a statement that the plan of merger will be furnished by the surviving organization, on request and without cost, to any owner of any constituent organization which is a party to the merger.
(b) After a plan of stock exchange in which the acquired entity is a corporation has been adopted and approved as required by this chapter, a statement of stock exchange shall be signed by the acquired entity and the acquiring entity. The statement of stock exchange shall set forth:
(1) the name and mailing address of the principal office of the acquired entity, and the jurisdiction of its governing statute, and its unique identifying number or other designation as assigned by the Secretary of State, if any;
(2) the name, jurisdiction of formation, and type of entity of the corporation or foreign corporation that is the acquiring entity;
(3) a statement that the plan of stock exchange was duly approved by the acquired entity by:
(i) the required vote or consent of each class or series of stock included in the exchange; and
(ii) the required vote or consent of each other class or series of stock entitled to vote on approval of the exchange by the certificate of incorporation of the acquired entity; and
(4) if the stock exchange did not require the approval by the stockholders of a corporation that is a party to the stock exchange, a statement to that effect.
(c) In addition to the requirements of subsection (a) or subsection (b), a statement of merger or stock exchange may contain any other provision not prohibited by law.
(d) The statement of merger or stock exchange shall be delivered to the Secretary of State for filing and, subject to subsection (e), the merger or stock exchange shall take effect at the effective date determined in accordance with Article 4 of Chapter 1.
(e) With respect to a merger in which one or more foreign organizations is a constituent organization or a foreign organization created by the merger is the surviving organization, the merger itself shall become effective at the later of:
(1) when all documents required to be filed in foreign jurisdictions to effect the merger have become effective, or
(2) when the statement of merger takes effect.
(f) A statement of merger filed under this section may be combined with any filing required under the governing statute governing any domestic organization involved in the transaction if the combined filing satisfies the requirements of this section, the other governing statute, and Article 4 of Chapter 1.
(g) A certified copy of the statement of merger required to be filed under this section may be filed in the real estate records in the office of the judge of probate in any county in which any constituent organization owned real property, without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate, however, shall be entitled to collect the filing fee of five dollars ($5). Any filing shall evidence chain of title, but lack of filing shall not affect the surviving organization’s title to real property.
(Act 2019-94, §1; Act 2023-503, §3.)
(a) When a merger becomes effective:
(1) the surviving organization continues or, in the case of a surviving organization created pursuant to the merger, comes into existence;
(2) each constituent organization that merges into the surviving organization ceases to exist as a separate entity;
(3) except as provided in the plan of merger, all property owned by, and every contract right possessed by, each constituent organization that ceases to exist vests in the surviving organization without transfer, reversion, or impairment and the title to any property and contract rights vested by deed or otherwise in the surviving organization shall not revert, be in any way impaired, or be deemed to be a transfer by reason of the merger;
(4) all debts, obligations, and other liabilities of each constituent organization, other than the surviving organization, are debts, obligations, and liabilities of the surviving organization, and neither the rights of creditors, nor any liens upon the property of any constituent organization, shall be impaired by the merger;
(5) an action or proceeding pending by or against any constituent organization continues as if the merger had not occurred and the name of the surviving organization may, but need not be, substituted in any pending proceeding for the name of any constituent organization whose separate existence ceased in the merger;
(6) except as prohibited by law other than this chapter or as provided in the plan of merger, all the rights, privileges, franchises, immunities, powers, and purposes of each constituent organization, other than the surviving organization, vest in the surviving organization;
(7) except as otherwise provided in the plan of merger, the terms and conditions of the plan of merger take effect;
(8) except as otherwise agreed, if a constituent organization that is a corporation ceases to exist, the merger does not dissolve the corporation;
(9) if the surviving organization is created pursuant to the merger:
(A) if it is a corporation, the certificate of incorporation and bylaws become effective; or
(B) if it is an organization other than a corporation, the organizational documents that create the organization becomes effective;
(10) if the surviving organization existed before the merger, any amendments provided for in the statement of merger for the organizational documents of that organization become effective;
(11) the stock of each corporation or foreign corporation that is a constituent organization to the merger, and the eligible interests in an eligible entity that is a constituent organization, that are to be converted in accordance with the terms of the merger into stock or other securities, eligible interests, obligations, rights to acquire stock, other securities, or eligible interests, cash, other property, or any combination of the foregoing, are converted, and the former holders of stock or eligible interests are entitled only to the rights provided to them by those terms or to any rights they may have under Article 13 or the governing statute governing the eligible entity or foreign corporation;
(12) if the surviving organization exists before the merger:
(i) except as provided in the plan of merger, all property and contract rights of the surviving organization remain its property and contract rights without transfer, reversion, or impairment;
(ii) the surviving organization remains subject to all its debts, obligations, and other liabilities; and
(iii) except as provided by law other than this chapter or the plan of merger, the surviving organization continues to hold all of its rights, privileges, franchises, immunities, powers and purposes.
(b) When a stock exchange becomes effective, the stock in the acquired entity that is to be exchanged for stock or other securities, obligations, rights to acquire stock, other securities, cash, other property, or any combination of the foregoing, are entitled only to the rights provided to them in the plan of stock exchange or to any rights they may have under Article 13 or under the governing statute governing the acquired entity.
(c) A surviving organization that is a foreign organization:
(1) consents to the jurisdiction of this state to enforce any debt, obligation, or other liability owed by a constituent organization, if before the merger the constituent organization was subject to suit in this state on the debt, obligation, or other liability;
(2) consents that if it fails to designate or maintain a registered agent, or the designated registered agent cannot with reasonable diligence be served, then the service of process on that surviving organization for the purposes of enforcing a debt, obligation, or other liability under this subsection and for enforcing the rights of stockholders of each corporation that is a constituent organization who exercise appraisal rights may be made in the same manner and has the same consequences as provided in Section 10A-1-5.35; and
(3) agrees that it will promptly pay the amount, if any, to which stockholders referred to in clause (2) of this subsection (c) are entitled under Article 13.
(Act 2019-94, §1.)
(a) After a plan of merger or stock exchange has been adopted and approved as required by this Article 11, and before the statement of merger or stock exchange has become effective, the plan may be abandoned by a corporation that is a party to the plan without action by its stockholders in accordance with any procedures set forth in the plan of merger or stock exchange or, if no procedures are set forth in the plan, in the manner determined by the board of directors.
(b) If a merger or stock exchange is abandoned under subsection (a) after the statement of merger or stock exchange has been delivered to the Secretary of State for filing but before the merger or stock exchange has become effective, a statement of abandonment signed by all the parties that signed the statement of merger or stock exchange shall be delivered to the Secretary of State for filing before the statement of merger or stock exchange becomes effective. The statement shall take effect on filing and the merger or stock exchange shall be deemed abandoned and shall not become effective. The statement of abandonment must contain:
(1) the name of each party to the merger or the names of the acquiring and acquired entities in a stock exchange;
(2) the date on which the statement of merger or stock exchange was filed by the Secretary of State; and
(3) a statement that the merger or stock exchange has been abandoned in accordance with this section.
(Act 2019-94, §1.)
This article is not exclusive. This article does not preclude a corporation from merging or exchanging its stock under law other than this chapter.
(Act 2019-94, §1.)
(a) No approval of the stockholders is required, unless the certificate of incorporation otherwise provides:
(1) to sell, lease, exchange, or otherwise dispose of any or all of the corporation’s assets in the usual and regular course of business;
(2) to mortgage, pledge, dedicate to the repayment of indebtedness (whether with or without recourse), or otherwise encumber any or all of the corporation’s assets, regardless of whether in the usual and regular course of business;
(3) to transfer any or all of the corporation’s assets to one or more corporations, foreign corporations, or other entities all of the stock or interests of which are owned by the corporation; or
(4) to distribute assets pro rata to the holders of one or more classes or series of the corporation’s stock.
(b) Without limiting the rights of a secured party under applicable law, no approval by stockholders shall be required by Section 10A-2A-12.02 for a sale, lease, exchange, or other disposition of any of the corporation’s assets if those assets are mortgaged, pledged, dedicated to the repayment of indebtedness, or otherwise encumbered for the benefit of a secured party or other creditor and either:
(1) The secured party or other creditor exercises its rights under the law governing the mortgage, pledge, dedication, or encumbrance, or other applicable law, whether under the Uniform Commercial Code, a real property law, or other law, to effect the sale, lease, exchange, or other disposition of those assets without the consent of the corporation; or
(2) In lieu of the secured party or other creditor exercising such rights, the board of directors of the corporation authorizes an alternative sale, lease, exchange, or other disposition of those assets, whether with the secured party or other creditor, that results in the reduction or elimination of the total liabilities or obligations secured by those assets, provided that (i) the value of those assets is less than or equal to the total amount of the liabilities or obligations being eliminated or reduced and (ii) the sale, lease, exchange, or other disposition of those assets is not prohibited by the law governing the mortgage, pledge, dedication, or encumbrance. The provision of consideration to the corporation or to its stockholders shall not create a presumption that the value of the assets is greater than the total amount of the liabilities or obligations being eliminated or reduced.
(c) A failure to satisfy the condition in subsection (b)(2)(i) shall not result in the invalidation of a sale, lease, exchange, or other disposition of the corporation’s assets if the transferee of those assets (i) provided value therefor (which may include the reduction or elimination of the total liabilities or obligations secured by those assets) and (ii) acted in good faith (as defined in Section 7-1-201(b)). The preceding sentence shall not apply to a proceeding against the corporation and any other necessary parties to enjoin the sale, lease, exchange, or other disposition of the corporation’s assets before the consummation thereof and shall not eliminate any liability for monetary damages for any claim, including a claim in the right of the corporation, based upon a violation of a duty by a current or former director or officer, or other person.
(d) A provision of the certificate of incorporation that requires the authorization or consent of stockholders for a sale, lease, exchange, or other disposition of the corporation’s assets shall not apply to a transaction permitted by subsection (b) unless that provision expressly so requires.
(Act 2019-94, §1; Act 2024-413, §1.)
(a) A sale, lease, exchange, or other disposition of assets, other than a disposition described in Section 10A-2A-12.01, requires approval of the corporation’s stockholders if the disposition would leave the corporation without a significant continuing business activity. A corporation will conclusively be deemed to have retained a significant continuing business activity if it retains a business activity that represented, for the corporation and its subsidiaries on a consolidated basis, at least (i) 25 percent of total assets at the end of the most recently completed fiscal year, and (ii) either 25 percent of either income from continuing operations before taxes or 25 percent of revenues from continuing operations, in each case for the most recently completed fiscal year.
(b) To obtain the approval of the stockholders under subsection (a) the board of directors shall first adopt a resolution authorizing the disposition. The disposition shall then be approved by the stockholders. In submitting the disposition to the stockholders for approval, the board of directors shall recommend that the stockholders approve the disposition, unless (i) the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make a recommendation, or (ii) Section 10A-2A-8.26 applies. If either (i) or (ii) applies, the board of directors shall inform the stockholders of the basis for its so proceeding.
(c) The board of directors may set conditions for the approval by the stockholders of a disposition or the effectiveness of the disposition.
(d) If a disposition is required to be approved by the stockholders under subsection (a), and if the approval is to be given at a meeting, the corporation shall notify each stockholder, regardless of whether entitled to vote, of the meeting of stockholders at which the disposition is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the disposition and must contain a description of the disposition, including the terms and conditions of the disposition and the consideration to be received by the corporation.
(e) Unless the certificate of incorporation or the board of directors acting pursuant to subsection (c) requires a greater vote or a greater quorum, the approval of a disposition by the stockholders shall require the approval of the stockholders at a meeting at which a quorum exists consisting of a majority of the votes entitled to be cast on the disposition.
(f) After a disposition has been approved by the stockholders under this Article 12, and at any time before the disposition has been consummated, it may be abandoned by the corporation without action by the stockholders, subject to any contractual rights of other parties to the disposition.
(g) A disposition of assets in the course of dissolution under Article 14 is not governed by this section.
(h) For purposes of this section only, the property and assets of the corporation include the property and assets of any subsidiary of the corporation. As used in this subsection, “subsidiary” means any entity wholly owned and controlled, directly or indirectly, by the corporation and includes, without limitation, corporations, partnerships, limited partnerships, limited liability partnerships, limited liability companies, and/or statutory trusts.
(Act 2019-94, §1; Act 2023-503, §3.)
In this Article 13:
(1) AFFILIATE means a person that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with another person or is a senior executive of that person. For purposes of Section 10A-2A-13.02(b)(4), a person is deemed to be an affiliate of its senior executives.
(2) CORPORATION means the corporation that is the issuer of the stock held by a stockholder demanding appraisal and, for matters covered in Section 10A-2A-13.22 through Section 10A-2A-13.31, includes the surviving organization of a merger.
(3) FAIR VALUE means the value of the corporation’s stock determined:
(i) immediately before the effectiveness of the corporate action to which the stockholder objects;
(ii) using customary and current valuation concepts and techniques generally employed for similar businesses in the context of the transaction requiring appraisal; and
(iii) without discounting for lack of marketability or minority status.
(4) INTEREST means interest from the date the corporate action becomes effective until the date of payment, and shall be compounded quarterly and shall accrue at five percent over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the effective date of the corporate action and the date of payment.
(5) INTERESTED TRANSACTION means a corporate action described in Section 10A-2A-13.02(a), other than a merger pursuant to Section 10A-2A-11.05, involving an interested person in which any of the stock or assets of the corporation are being acquired or converted. As used in this definition:
(i) “Interested person” means a person, or an affiliate of a person, who at any time during the one-year period immediately preceding approval by the board of directors of the corporate action:
(A) was the beneficial owner of 20 percent or more of the voting power of the corporation, other than as owner of excluded stock;
(B) had the power, contractually or otherwise, other than as owner of excluded stock, to cause the appointment or election of 25 percent or more of the directors to the board of directors of the corporation; or
(C) was a senior executive or director of the corporation or a senior executive of any affiliate of the corporation, and that senior executive or director will receive, as a result of the corporate action, a financial benefit not generally available to other stockholders as such, other than:
(I) employment, consulting, retirement, or similar benefits established separately and not as part of or in contemplation of the corporate action;
(II) employment, consulting, retirement, or similar benefits established in contemplation of, or as part of, the corporate action that are not more favorable than those existing before the corporate action or, if more favorable, that have been approved on behalf of the corporation in the same manner as is provided in Section 10A-2A-8.60; or
(III) in the case of a director of the corporation who will, in the corporate action, become a director or governing person of the acquiror or any of its affiliates, rights and benefits as a director or governing person that are provided on the same basis as those afforded by the acquiror generally to other directors or governing persons of the acquiror or its affiliate.
(ii) “Beneficial owner” means any person who, directly or indirectly, through any contract, arrangement, or understanding, other than a revocable proxy, has or shares the power to vote, or to direct the voting of, stock; except that a member of a national securities exchange is not deemed to be a beneficial owner of securities held directly or indirectly by it on behalf of another person if the member is precluded by the rules of the exchange from voting without instruction on contested matters or matters that may affect substantially the rights or privileges of the holders of the securities to be voted. When two or more persons agree to act together for the purpose of voting their stock of the corporation, each member of the group formed thereby is deemed to have acquired beneficial ownership, as of the date of the agreement, of all stock having voting power of the corporation beneficially owned by any member of the group.
(iii) “Excluded stock” means stock acquired pursuant to an offer for all stock having voting power if the offer was made within one year before the corporate action for consideration of the same kind and of a value equal to or less than that paid in connection with the corporate action.
(6) PREFERRED STOCK means a class or series of stock whose holders have preference over any other class or series of stock with respect to distributions.
(7) SENIOR EXECUTIVE means the chief executive officer, chief operating officer, chief financial officer, and any individual in charge of a principal business unit or function.
(8) STOCKHOLDER means a record stockholder, a beneficial stockholder, and a voting trust beneficial owner.
(Act 2019-94, §1; Act 2021-299, §3.)
(a) A stockholder is entitled to appraisal rights, and to obtain payment of the fair value of that stockholder’s stock, in the event of any of the following corporate actions:
(1) consummation of a merger to which the corporation is a party (i) if the corporation is a subsidiary and the merger is governed by Section 10A-2A-11.05 or (ii) if stockholder approval is required for the merger by Section 10A-2A-11.04, or would be required but for the provisions of Section 10A-2A-11.04(j), except that appraisal rights shall not be available to any stockholder of the corporation with respect to stock of any class or series that remain outstanding after consummation of the merger;
(2) consummation of a stock exchange to which the corporation is a party the stock of which will be acquired, except that appraisal rights shall not be available to any stockholder of the corporation with respect to any class or series of stock of the corporation that is not acquired in the stock exchange;
(3) consummation of a disposition of assets pursuant to Section 10A-2A-12.02 if the stockholder is entitled to vote on the disposition, except that appraisal rights shall not be available to any stockholder of the corporation with respect to stock of any class or series if (i)(A) under the terms of the corporate action approved by the stockholders there is to be distributed to stockholders in cash the corporation’s net assets, in excess of a reasonable amount reserved to meet claims of the type described in Section 10A-2A-14.06 and Section 10A-2A-14.07, (I) within one year after the stockholders’ approval of the action and (II) in accordance with their respective interests determined at the time of distribution, and (B) the disposition of assets is not an interested transaction, or (ii) the certificate of incorporation states that no stockholder shall be entitled to appraisal rights with respect to the consummation of a disposition of assets pursuant to Section 10A-2A-12.02;
(4) an amendment of the certificate of incorporation with respect to a class or series of stock that reduces the number of stock of a class or series owned by the stockholder to a fraction of a stock if the corporation has the obligation or right to repurchase the fractional stock so created;
(5) any other merger, stock exchange, disposition of assets or amendment to the certificate of incorporation, in each case to the extent provided by the certificate of incorporation, bylaws or a resolution of the board of directors;
(6) consummation of a conversion of a corporation to a foreign corporation pursuant to Article 9 of this chapter or Article 8 of Chapter 1 if the stockholder does not receive stock in the foreign corporation resulting from the conversion that has terms as favorable to the stockholder in all material respects, and represents at least the same percentage interest of the total voting rights of the outstanding stock of the foreign corporation, as the stock held by the stockholder before the conversion;
(7) consummation of a conversion of a corporation to a nonprofit corporation pursuant to Article 9 of this chapter or Article 8 of Chapter 1; or
(8) consummation of a conversion of the corporation to an unincorporated entity pursuant to Article 9 of this chapter or Article 8 of Chapter 1.
(b) Notwithstanding subsection (a), the availability of appraisal rights under subsections (a)(1), (2), (3), (4), (6), and (8) shall be limited in accordance with the following provisions:
(1) Appraisal rights shall not be available for the holders of stock of any class or series of stock which is:
(i) a covered security under Section 18(b)(1)(A) or (B) of the Securities Act of 1933;
(ii) has at least 2,000 record stockholders; or
(iii) issued by an open end management investment company registered with the Securities and Exchange Commission under the Investment Company Act of 1940 and which may be redeemed at the option of the holder at net asset value.
(2) The applicability of subsection (b)(1) shall be determined as of:
(i) the record date fixed to determine the stockholders entitled to receive notice of the meeting of stockholders to act upon the corporate action requiring appraisal rights or, in the case of an offer made pursuant to Section 10A-2A-11.04(j), the date of the offer; or
(ii) if there is no meeting of stockholders and no offer made pursuant to Section 10A-2A-11.04(j), the day before the consummation of the corporate action or effective date of the amendment of the certificate of incorporation, as applicable.
(3) Subsection (b)(1) shall not be applicable and appraisal rights shall be available pursuant to subsection (a) for the holders of any class or series of stock (i) who are required by the terms of the corporate action requiring appraisal rights to accept for their stock anything other than cash or stock of any class or any series of stock of any corporation, or any other proprietary interest of any other entity, that satisfies the standards set forth in subsection (b)(1) at the time the corporate action becomes effective, (ii) in the case of the consummation of a disposition of assets pursuant to Section 10A-2A-12.02, unless the cash, stock, or proprietary interests received in the disposition are, under the terms of the corporate action approved by the stockholders, to be distributed to the stockholders, as part of a distribution to stockholders of the net assets of the corporation in excess of a reasonable amount to meet claims of the type described in Sections 10A-2A-14.06 and 10A-2A-14.07, (A) within one year after the stockholders’ approval of the action, and (B) in accordance with their respective interests determined at the time of the distribution, or (iii) in the case of the consummation of a disposition of assets pursuant to Section 10A-2A-12.02, unless the certificate of incorporation states that no stockholder shall be entitled to appraisal rights with respect to the consummation of a disposition of assets pursuant to Section 10A-2A-12.02.
(4) Subsection (b)(1) shall not be applicable and appraisal rights shall be available pursuant to subsection (a) for the holders of any class or series of stock where the corporate action is an interested transaction.
(c) Notwithstanding any other provision of this Section 10A-2A-13.02, the certificate of incorporation as originally filed or any amendment to the certificate of incorporation may limit or eliminate appraisal rights for any class or series of preferred stock, except that (i) no limitation or elimination shall be effective if the class or series does not have the right to vote separately as a voting group (alone or as part of a group) on the action or if the action is a conversion or merger in which the converted organization or the surviving organization is not a corporation or foreign corporation, and (ii) any limitation or elimination contained in an amendment to the certificate of incorporation that limits or eliminates appraisal rights for any stock that is outstanding immediately before the effective date of the amendment or that the corporation is or may be required to issue or sell thereafter pursuant to any conversion, exchange, or other right existing immediately before the effective date of the amendment shall not apply to any corporate action that becomes effective within one year after the effective date of the amendment if that action would otherwise afford appraisal rights.
(Act 2019-94, §1; Act 2024-413, §1.)
(a) A record stockholder may assert appraisal rights as to fewer than all the shares of stock registered in the record stockholder’s name but owned by a beneficial stockholder or a voting trust beneficial owner only if the record stockholder objects with respect to all shares of stock of a class or series owned by the beneficial stockholder or the voting trust beneficial owner and notifies the corporation in writing of the name and address of each beneficial stockholder or voting trust beneficial owner on whose behalf appraisal rights are being asserted. The rights of a record stockholder who asserts appraisal rights for only part of the stock held of record in the record stockholder’s name under this subsection shall be determined as if the stock as to which the record stockholder objects and the record stockholder’s other shares of stock were registered in the names of different record stockholders.
(b) A beneficial stockholder and a voting trust beneficial owner may assert appraisal rights as to stock of any class or series held on behalf of the stockholder only if the stockholder:
(1) submits to the corporation the record stockholder’s written consent to the assertion of appraisal rights no later than the date referred to in Section 10A-2A-13.22(b)(2)(ii); and
(2) does so with respect to all stock of the class or series that is beneficially owned by the beneficial stockholder or the voting trust beneficial owner.
(Act 2019-94, §1.)
(a) Where any corporate action specified in Section 10A-2A-13.02(a) is to be submitted to a vote at a stockholders’ meeting, the meeting notice (or where no approval of the corporate action is required pursuant to Section 10A-2A-11.04(j), the offer made pursuant to Section 10A-2A-11.04(j)), must state that the corporation has concluded that appraisal rights are, are not, or may be available under this Article 13. If the corporation concludes that appraisal rights are or may be available, a copy of this Article 13 must accompany the meeting notice or offer sent to those record stockholders entitled to exercise appraisal rights.
(b) In a merger pursuant to Section 10A-2A-11.05, the parent entity shall notify in writing all record stockholders of the subsidiary who are entitled to assert appraisal rights that the corporate action became effective. The notice shall be sent within 10 days after the corporate action became effective and include the materials described in Section 10A-2A-13.22.
(c) Where any corporate action specified in Section 10A-2A-13.02(a) is to be approved by written consent of the stockholders pursuant to Section 10A-2A-7.04:
(1) written notice that appraisal rights are, are not, or may be available shall be sent to each record stockholder from whom a consent is solicited at the time consent of each stockholder is first solicited and, if the corporation has concluded that appraisal rights are or may be available, the notice must be accompanied by a copy of this Article 13; and
(2) written notice that appraisal rights are, are not, or may be available must be delivered together with the notice to nonconsenting and nonvoting stockholders required by Section 10A-2A-7.04(d) and (e), may include the materials described in Section 10A-2A-13.22 and, if the corporation has concluded that appraisal rights are or may be available, must be accompanied by a copy of this Article 13.
(d) Where corporate action described in Section 10A-2A-13.02(a) is proposed, or a merger pursuant to Section 10A-2A-11.05 is effected, the notice referred to in subsection (a) or (c), if the corporation concludes that appraisal rights are or may be available, and in subsection (b) must be accompanied by:
(1) financial statements of the corporation that issued the stock that may be subject to appraisal, consisting of a balance sheet as of the end of a fiscal year ending not more than 16 months before the date of the notice, an income statement for that year, and a cash flow statement for that year; provided that, if the financial statements are not reasonably available, the corporation shall provide reasonably equivalent financial information; and
(2) the latest interim financial statements of the corporation, if any.
(e) The right to receive the information described in subsection (d) may be waived in writing by a stockholder before or after the corporate action.
(Act 2019-94, §1.)
(a) If a corporate action specified in Section 10A-2A-13.02(a) is submitted to a vote at a stockholders’ meeting, a stockholder who wishes to assert appraisal rights with respect to any class or series of stock:
(1) shall deliver to the corporation, before the vote is taken, written notice of the stockholder’s intent to demand payment if the proposed action is effectuated; and
(2) shall not vote, or cause or permit to be voted, any stock of the class or series in favor of the proposed action.
(b) If a corporate action specified in Section 10A-2A-13.02(a) is to be approved by written consent, a stockholder who wishes to assert appraisal rights with respect to any class or series of stock shall not sign a consent in favor of the proposed action with respect to that class or series of stock.
(c) If a corporate action specified in Section 10A-2A-13.02(a) does not require stockholder approval pursuant to Section 10A-2A-11.04(j), a stockholder who wishes to assert appraisal rights with respect to any class or series of stock (i) shall deliver to the corporation before the stock is purchased pursuant to the offer written notice of the stockholder’s intent to demand payment if the proposed action is effected; and (ii) shall not tender, or cause or permit to be tendered, any stock of the class or series in response to the offer.
(d) A stockholder who fails to satisfy the requirements of subsection (a), (b), or (c) is not entitled to payment under this Article 13.
(Act 2019-94, §1.)
(a) If a corporate action requiring appraisal rights under Section 10A-2A-13.02(a) becomes effective, the corporation shall deliver a written appraisal notice and form required by subsection (b) to all stockholders who satisfy the requirements of Section 10A-2A-13.21(a), (b), or (c). In the case of a merger under Section 10A-2A-11.05, the parent shall deliver an appraisal notice and form to all record stockholders who may be entitled to assert appraisal rights.
(b) The appraisal notice shall be delivered no earlier than the date the corporate action specified in Section 10A-2A-13.02(a) became effective, and no later than 10 days after that date, and must:
(1) supply a form that (i) specifies the first date of any announcement to stockholders made before the date the corporate action became effective of the principal terms of the proposed corporate action, (ii) if the announcement was made, requires the stockholder asserting appraisal rights to certify whether beneficial ownership of those shares of stock for which appraisal rights are asserted was acquired before that date, and (iii) requires the stockholder asserting appraisal rights to certify that the stockholder did not vote for or consent to the transaction as to the class or series of stock for which appraisal is sought;
(2) state:
(i) where the form shall be sent and where certificates for certificated stock shall be deposited and the date by which those certificates must be deposited, which date may not be earlier than the date by which the corporation must receive the required form under subsection (b)(2)(ii);
(ii) a date by which the corporation shall receive the form, which date may not be fewer than 40 nor more than 60 days after the date the subsection (a) appraisal notice is sent, and state that the stockholder shall have waived the right to demand appraisal with respect to the stock unless the form is received by the corporation by the specified date;
(iii) the corporation’s estimate of the fair value of the stock;
(iv) that, if requested in writing, the corporation will provide, to the stockholder so requesting, within 10 days after the date specified in subsection (b)(2)(ii) the number of stockholders who return the forms by the specified date and the total number of shares of stock owned by them; and
(v) the date by which the notice to withdraw under Section 10A-2A-13.23 shall be received, which date shall be within 20 days after the date specified in subsection (b)(2)(ii); and
(3) be accompanied by a copy of this Article 13.
(Act 2019-94, §1.)
(a) A stockholder who receives notice pursuant to Section 10A-2A-13.22 and who wishes to exercise appraisal rights shall sign and return the form sent by the corporation and, in the case of certificated stock, deposit the stockholder’s certificates in accordance with the terms of the notice by the date referred to in the notice pursuant to Section 10A-2A-13.22(b)(2)(ii). In addition, if applicable, the stockholder shall certify on the form whether the beneficial owner of the stock acquired beneficial ownership of the stock before the date required to be set forth in the notice pursuant to Section 10A-2A-13.22(b)(1)(i). If a stockholder fails to make this certification, the corporation may elect to treat the stockholder’s stock as after-acquired stock under Section 10A-2A-13.25. Once a stockholder deposits the certificates or, in the case of uncertificated stock, returns the signed forms, that stockholder loses all rights as a stockholder, unless the stockholder withdraws pursuant to subsection (b).
(b) A stockholder who has complied with subsection (a) may nevertheless decline to exercise appraisal rights and withdraw from the appraisal process by so notifying the corporation in writing by the date set forth in the appraisal notice pursuant to Section 10A-2A-13.22(b)(2)(v). A stockholder who fails to so withdraw from the appraisal process may not thereafter withdraw without the corporation’s written consent.
(c) A stockholder who does not sign and return the form and, in the case of certificated stock, deposit that stockholder’s stock certificates where required, each by the date set forth in the notice described in Section 10A-2A-13.22(b), shall not be entitled to payment under this Article 13.
(Act 2019-94, §1.)
(a) Except as provided in Section 10A-2A-13.25, within 30 days after the form required by Section 10A-2A-13.22(b)(2)(ii) is due, the corporation shall pay in cash to those stockholders who complied with Section 10A-2A-13.23(a) the amount the corporation estimates to be the fair value of their stock, plus interest.
(b) The payment to each stockholder pursuant to subsection (a) must be accompanied by:
(1)(i) financial statements of the corporation that issued the stock to be appraised, consisting of a balance sheet as of the end of a fiscal year ending not more than 16 months before the date of payment, an income statement for that year, and a cash flow statement for that year; provided that, if the annual financial statements are not reasonably available, the corporation shall provide reasonably equivalent financial information, and (ii) the latest interim financial statements of the corporation, if any;
(2) a statement of the corporation’s estimate of the fair value of the stock, which estimate shall equal or exceed the corporation’s estimate given pursuant to Section 10A-2A-13.22(b)(2)(iii); and
(3) a statement that stockholders described in subsection (a) have the right to demand further payment under Section 10A-2A-13.26 and that if any stockholder does not do so within the time period specified in Section 10A-2A-13.26(b), the stockholder shall be deemed to have accepted the payment under subsection (a) in full satisfaction of the corporation’s obligations under this Article 13.
(Act 2019-94, §1.)
(a) A corporation may elect to withhold payment required by Section 10A-2A-13.24 from any stockholder who was required to, but did not certify that beneficial ownership of all of the stockholder’s stock for which appraisal rights are asserted was acquired before the date set forth in the appraisal notice sent pursuant to Section 10A-2A-13.22(b)(1).
(b) If the corporation elects to withhold payment under subsection (a), it shall, within 30 days after the form required by Section 10A-2A-13.22(b)(2)(ii) is due, notify all stockholders who are described in subsection (a):
(1) of the information required by Section 10A-2A-13.24(b)(1);
(2) of the corporation’s estimate of fair value pursuant to Section 10A-2A-13.24(b)(2);
(3) that they may accept the corporation’s estimate of fair value, plus interest, in full satisfaction of their demands or demand appraisal under Section 10A-2A-13.26;
(4) that those stockholders who wish to accept the offer shall so notify the corporation of their acceptance of the corporation’s offer within 30 days after receiving the offer; and
(5) that those stockholders who do not satisfy the requirements for demanding appraisal under Section 10A-2A-13.26 shall be deemed to have accepted the corporation’s offer.
(c) Within 10 days after receiving the stockholder’s acceptance pursuant to subsection (b)(4), the corporation shall pay in cash the amount it offered under subsection (b)(2) plus interest to each stockholder who agreed to accept the corporation’s offer in full satisfaction of the stockholder’s demand.
(d) Within 40 days after delivering the notice described in subsection (b), the corporation shall pay in cash the amount it offered to pay under subsection (b)(2) plus interest to each stockholder described in subsection (b)(5).
(Act 2019-94, §1.)
(a) A stockholder paid pursuant to Section 10A-2A-13.24 who is dissatisfied with the amount of the payment shall notify the corporation in writing of that stockholder’s estimate of the fair value of the stock and demand payment of that estimate (less any payment under Section 10A-2A-13.24) plus interest. A stockholder offered payment under Section 10A-2A-13.25 who is dissatisfied with that offer shall reject the offer and demand payment of the stockholder’s stated estimate of the fair value of the stock plus interest.
(b) A stockholder who fails to notify the corporation in writing of that stockholder’s demand to be paid the stockholder’s stated estimate of the fair value plus interest under subsection (a) within 30 days after receiving the corporation’s payment or offer of payment under Section 10A-2A-13.24 or Section 10A-2A-13.25, respectively, waives the right to demand payment under this section and shall be entitled only to the payment made or offered pursuant to those respective sections.
(Act 2019-94, §1.)
(a) If a stockholder makes demand for payment under Section 10A-2A-13.26 which remains unsettled, the corporation shall commence a proceeding within 60 days after receiving the payment demand and petition the court to determine the fair value of the stock and accrued interest. If the corporation does not commence the proceeding within the 60-day period, it shall pay in cash to each stockholder the amount the stockholder demanded pursuant to Section 10A-2A-13.26 plus interest.
(b) The corporation shall commence the proceeding in the designated court, and if none, the circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the corporation’s most recent registered office is located.
(c) The corporation shall make all stockholders (regardless of whether they are residents of this state) whose demands remain unsettled parties to the proceeding as in an action against their stock, and all parties shall be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law.
(d) The jurisdiction of the court in which the proceeding is commenced under subsection (b) is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers shall have the powers described in the order appointing them, or in any amendment to it. The stockholders demanding appraisal rights are entitled to the same discovery rights as parties in other civil proceedings. There shall be no right to a jury trial.
(e) Each stockholder made a party to the proceeding is entitled to judgment (i) for the amount, if any, by which the court finds the fair value of the stockholder’s stock exceeds the amount paid by the corporation to the stockholder for the stock, plus interest, or (ii) for the fair value, plus interest, of the stockholder’s stock for which the corporation elected to withhold payment under Section 10A-2A-13.25.
(Act 2019-94, §1; Act 2020-73, §7.)
(a) The court in an appraisal proceeding commenced under Section 10A-2A-13.30 shall determine all court costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the court costs against the corporation, except that the court may assess court costs against all or some of the stockholders demanding appraisal, in amounts which the court finds equitable, to the extent the court finds the stockholders acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this article.
(b) The court in an appraisal proceeding may also assess the expenses of the respective parties in amounts the court finds equitable:
(1) against the corporation and in favor of any or all stockholders demanding appraisal if the court finds the corporation did not substantially comply with the requirements of Section 10A-2A-13.20, Section 10A-2A-13.22, Section 10A-2A-13.24, or Section 10A-2A-13.25; or
(2) against either the corporation or a stockholder demanding appraisal, in favor of any other party, if the court finds the party against whom expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this Article 13.
(c) If the court in an appraisal proceeding finds that the expenses incurred by any stockholder were of substantial benefit to other stockholders similarly situated and that the expenses should not be assessed against the corporation, the court may direct that the expenses be paid out of the amounts awarded the stockholders who were benefited.
(d) To the extent the corporation fails to make a required payment pursuant to Section 10A-2A-13.24, Section 10A-2A-13.25, or Section 10A-2A-13.26, the stockholder may sue directly for the amount owed, and to the extent successful, shall be entitled to recover from the corporation all expenses of the suit.
(Act 2019-94, §1.)
(a) The legality of a proposed or completed corporate action described in Section 10A-2A-13.02(a) may not be contested, nor may the corporate action be enjoined, set aside or rescinded, in a legal or equitable proceeding by a stockholder after the stockholders have approved the corporate action.
(b) Subsection (a) does not apply to a corporate action that:
(1) was not authorized and approved in accordance with the applicable provisions of:
(i) Article 9, 10, 11, or 12 of this chapter or Article 8 of Chapter 1;
(ii) the certificate of incorporation or bylaws; or
(iii) the resolution of the board of directors authorizing the corporate action;
(2) was procured as a result of fraud, a material misrepresentation, or an omission of a material fact necessary to make statements made, in light of the circumstances in which they were made, not misleading;
(3) is an interested transaction, unless it has been recommended by the board of directors in the same manner as is provided in Section 10A-2A-8.60 and has been approved by the stockholders in the same manner as is provided in Section 10A-2A-8.60 as if the interested transaction were a director’s conflicting interest transaction; or
(4) is approved by less than unanimous consent of the voting stockholders pursuant to Section 10A-2A-7.04 if:
(i) the challenge to the corporate action is brought by a stockholder who did not consent and as to whom notice of the approval of the corporate action was not effective at least 10 days before the corporate action was effected; and
(ii) the proceeding challenging the corporate action is commenced within 10 days after notice of the approval of the corporate action is effective as to the stockholder bringing the proceeding.
(Act 2019-94, §1.)
A majority of the incorporators or initial directors of a corporation that has not issued stock or has not commenced business may dissolve the corporation by delivering to the Secretary of State for filing a certificate of dissolution that sets forth:
(a) the name of the corporation;
(b) the date of its incorporation;
(c) either (i) that none of the corporation’s stock has been issued, or (ii) that the corporation has not commenced business;
(d) that no debt of the corporation remains unpaid;
(e) that the net assets of the corporation remaining after winding up have been distributed to the stockholders, if stock was issued;
(f) that a majority of the incorporators or initial directors authorized the dissolution; and
(g) the unique identifying number or other designation as assigned by the Secretary of State.
(Act 2019-94, §1; Act 2020-73, §7.)
(a) The board of directors may propose dissolution for submission to the stockholders by first adopting a resolution authorizing the dissolution.
(b) For a proposal to dissolve to be adopted, it shall then be approved by the stockholders. In submitting the proposal to dissolve to the stockholders for approval, the board of directors shall recommend that the stockholders approve the dissolution, unless (i) the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation or (ii) Section 10A-2A-8.26 applies. If either (i) or (ii) applies, the board of directors shall inform the stockholders of the basis for its so proceeding.
(c) The board of directors may set conditions for the approval of the proposal for dissolution by stockholders or the effectiveness of the dissolution.
(d) If the approval of the stockholders is to be given at a meeting, the corporation shall notify each stockholder, regardless of whether entitled to vote, of the meeting of stockholders at which the dissolution is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider dissolving the corporation.
(e) Unless the certificate of incorporation or the board of directors acting pursuant to subsection (c) requires a greater vote, a greater quorum, or a vote by voting groups, adoption of the proposal to dissolve shall require the approval of the stockholders at a meeting at which a quorum exists consisting of a majority of the votes entitled to be cast on the proposal to dissolve.
(f) Dissolution of a corporation may also be authorized without action of the directors if all the stockholders entitled to vote thereon shall consent in writing and a certificate of dissolution shall be delivered to the Secretary of State for filing pursuant to Section 10A-2A-14.03.
(Act 2019-94, §1.)
(a) At any time after dissolution is authorized, the corporation may dissolve by delivering to the Secretary of State for filing a certificate of dissolution setting forth:
(1) the name of the corporation;
(2) the date that dissolution was authorized;
(3) if dissolution was approved by the stockholders, a statement that the proposal to dissolve was duly approved by the stockholders in the manner required by this chapter and by the certificate of incorporation; and
(4) the unique identifying number or other designation as assigned by the Secretary of State.
(b) The certificate of dissolution shall take effect at the effective date determined in accordance with Article 4 of Chapter 1. A corporation is dissolved upon the effective date of its certificate of dissolution.
(c) For purposes of this Division A of this Article 14, “dissolved corporation” means a corporation whose certificate of dissolution has become effective and includes a successor entity to which the remaining assets of the corporation are transferred subject to its liabilities for purposes of liquidation.
(Act 2019-94, §1; Act 2020-73, §7.)
(a) A corporation may revoke its dissolution within 120 days after its effective date and be reinstated.
(b) Revocation of dissolution and reinstatement shall be authorized in the same manner as the dissolution was authorized unless that authorization permitted revocation and reinstatement by action of the board of directors alone, in which event the board of directors may revoke the dissolution and effect the reinstatement without stockholder action.
(c) After the revocation of dissolution and reinstatement is authorized, the corporation may revoke the dissolution and effect the reinstatement by delivering to the Secretary of State for filing a certificate of revocation of dissolution and reinstatement, together with a copy of its certificate of dissolution, that sets forth:
(1) the name of the corporation;
(2) the effective date of the dissolution that was revoked;
(3) the date that the revocation of dissolution and reinstatement was authorized;
(4) if the corporation’s board of directors (or incorporators) revoked the dissolution and effected the reinstatement, a statement to that effect;
(5) if the corporation’s board of directors revoked a dissolution and effected the reinstatement as authorized by the stockholders, a statement that revocation and reinstatement was permitted by action by the board of directors alone pursuant to that authorization;
(6) if stockholder action was required to revoke the dissolution and effect the reinstatement, a statement that the revocation and reinstatement was duly approved by the stockholders in the manner required by this chapter and by the certificate of incorporation; and
(7) the unique identifying number or other designation as assigned by the Secretary of State.
(d) The certificate of revocation of dissolution and reinstatement shall take effect at the effective date determined in accordance with Article 4 of Chapter 1. Revocation of dissolution and reinstatement is effective upon the effective date of the certificate of revocation of dissolution and reinstatement.
(e)(1) Subject to subsection (e)(2), upon revocation and reinstatement, the corporation shall be deemed for all purposes to have continued its business as if dissolution had never occurred; and each right inuring to, and each debt, obligation, and liability incurred by, the corporation after the dissolution shall be determined as if the dissolution had never occurred.
(2) The rights of persons acting in reliance on the dissolution before those persons had notice of the revocation and reinstatement shall not be adversely affected by the revocation and reinstatement.
(f) If the corporation is listed in the Secretary of State’s records as a corporation that has been dissolved, then the name of the corporation following revocation and reinstatement shall be that corporation name at the time of revocation and reinstatement if that corporation name complies with Article 5 of Chapter 1 at the time of revocation and reinstatement. If that corporation name does not comply with Article 5 of Chapter 1, the name of the corporation following revocation and reinstatement shall be that corporation name followed by the word “reinstated.”
(Act 2019-94, §1; Act 2020-73, §7.)
(a) A dissolved corporation continues its existence as a corporation but may not carry on any business except as is appropriate to wind up and liquidate its business and affairs, including:
(1) collecting its assets;
(2) disposing of its properties that will not be distributed in kind to stockholders;
(3) discharging or making provisions for discharging its liabilities;
(4) distributing its remaining property among its stockholders according to their interests; and
(5) doing every other act necessary to wind up and liquidate its business and affairs.
(b) In winding up its business and affairs, a corporation may:
(1) preserve the corporation’s business and affairs and property as a going concern for a reasonable time;
(2) prosecute, defend, or settle actions or proceedings whether civil, criminal, or administrative;
(3) transfer the corporation’s assets;
(4) resolve disputes by mediation or arbitration;
(5) merge or convert in accordance with Article 9 or 11 of this chapter or Article 8 of Chapter 1; and
(6) enter into a stock exchange in accordance with Article 11 of this chapter.
(c) Dissolution of a corporation does not:
(1) transfer title to the corporation’s property;
(2) prevent transfer of its stock or securities;
(3) subject its directors or officers to standards of conduct different from those prescribed in Article 8 of this chapter;
(4) change (i) quorum or voting requirements for its board of directors or stockholders;
(ii) provisions for selection, resignation, or removal of its directors or officers or both; or
(iii) provisions for amending its bylaws;
(5) prevent commencement of a proceeding by or against the corporation in its corporate name;
(6) abate or suspend a proceeding pending by or against the corporation on the effective date of dissolution; or
(7) terminate the authority of the registered agent of the corporation.
(d) A distribution in liquidation under this section may only be made by a dissolved corporation. For purposes of determining the stockholders entitled to receive a distribution in liquidation, the board of directors may fix a record date for determining stockholders entitled to a distribution in liquidation, which date may not be retroactive. If the board of directors does not fix a record date for determining stockholders entitled to a distribution in liquidation, the record date is the date the board of directors authorizes the distribution in liquidation.
(Act 2019-94, §1; Act 2024-413, §1.)
(a) A dissolved corporation may dispose of any known claims against it by following the procedures described in subsection (b) at any time after the effective date of the dissolution of the corporation.
(b) A dissolved corporation may give written notice of the dissolution to the holder of any known claim. The notice must:
(1) identify the dissolved corporation;
(2) describe the information required to be included in a claim;
(3) provide a mailing address to which the claim is to be sent;
(4) state the deadline, which may not be fewer than 120 days from the effective date of the notice, by which the dissolved corporation must receive the claim; and
(5) state that if not sooner barred, the claim will be barred if not received by the deadline.
(c) Unless sooner barred by any other statute limiting actions, a claim against a dissolved corporation is barred:
(1) if a claimant who was given notice under subsection (b) does not deliver the claim to the dissolved corporation by the deadline; or
(2) if a claimant whose claim was rejected by the dissolved corporation does not commence a proceeding to enforce the claim within 90 days from the effective date of the rejection notice.
(d) For purposes of this section, “known claim” or “claim” includes unliquidated claims, but does not include a contingent liability that has not matured so that there is no immediate right to bring suit or a claim based on an event occurring after the effective date of dissolution.
(e) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(Act 2019-94, §1.)
(a) A dissolved corporation may publish notice of its dissolution and request that persons with claims against the dissolved corporation present them in accordance with the notice.
(b) The notice authorized by subsection (a) must:
(1) be published at least one time in a newspaper of general circulation in the county in which the dissolved corporation’s principal office is located or, if it has none in this state, in the county in which the corporation’s most recent registered office is located;
(2) describe the information that must be included in a claim and provide a mailing address to which the claim is to be sent; and
(3) state that if not sooner barred, a claim against the dissolved corporation will be barred unless a proceeding to enforce the claim is commenced within two years after the publication of the notice.
(c) If a dissolved corporation publishes a newspaper notice in accordance with subsection (b), unless sooner barred by any other statute limiting actions, the claim of each of the following claimants is barred unless the claimant commences a proceeding to enforce the claim against the dissolved corporation within two years after the publication date of the newspaper notice:
(1) a claimant who was not given notice under Section 10A-2A-14.06;
(2) a claimant whose claim was timely sent to the dissolved corporation but not acted on by the dissolved corporation; and
(3) a claimant whose claim is contingent at the effective date of the dissolution of the corporation, or is based on an event occurring after the effective date of the dissolution of the corporation.
(d) A claim that is not barred under this section, any other statute limiting actions, or Section 10A-2A-14.06 may be enforced:
(1) against a dissolved corporation, to the extent of its undistributed assets; and
(2) except as provided in subsection (h), if the assets of a dissolved corporation have been distributed after dissolution, against each stockholder to the extent of the stockholder’s proportionate share of the claim or of the assets distributed to that stockholder after dissolution, whichever is less, but a stockholder’s total liability for all claims under subsection (d) may not exceed the total amount of assets distributed to that stockholder after dissolution of the corporation.
(e) A dissolved corporation that published a notice under this section may file an application with the circuit court for the county in which the dissolved corporation’s principal office is located in this state and if the corporation does not have a principal office within this state, with the circuit court for the county in which the dissolved corporation’s most recent registered office is located, for a determination of the amount and form of security to be provided for payment of claims that are contingent or have not been made known to the dissolved corporation or that are based on an event occurring after the effective date of the dissolution of the corporation but that, based on the facts known to the dissolved corporation, are reasonably estimated to arise after the effective date of the dissolution of the corporation. Provision need not be made for any claim that is or is reasonably anticipated to be barred under subsection (c).
(f) Within 10 days after the filing of the application provided for in subsection (e), notice of the proceeding shall be given by the dissolved corporation to each potential claimant as described in subsection (e).
(g) The circuit court under subsection (e) may appoint a guardian ad litem to represent all claimants whose identities are unknown in any proceeding brought under this section. The reasonable fees and expenses of the guardian, including all reasonable expert witness fees, shall be paid by the dissolved corporation.
(h) Provision by the dissolved corporation for security in the amount and the form ordered by the circuit court under subsection (e) shall satisfy the dissolved corporation’s obligation with respect to claims that are contingent, have not been made known to the dissolved corporation, or are based on an event occurring after the effective date of the dissolution of the corporation, and those claims may not be enforced against a stockholder to whom assets have been distributed by the dissolved corporation after the effective date of the dissolution of the corporation.
(i) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(j) If a claim has been satisfied, disposed of, or barred under Section 10A-2A-14.06, this section, or other law, the person or persons designated to wind up the affairs of a corporation, and the stockholders receiving assets from the dissolved corporation, shall not be liable for that claim.
(Act 2019-94, §1; Act 2020-73, §7.)
(a) Directors shall cause the dissolved corporation to discharge or make reasonable provision for the payment of claims and make distributions in liquidation of assets to stockholders after payment or provision for claims.
(b) Directors of a dissolved corporation which has disposed of claims under Section 10A-2A-14.06 or Section 10A-2A-14.07 shall not be liable for breach of Section 10A-2A-14.08(a) with respect to claims against the dissolved corporation that are barred or satisfied under Section 10A-2A-14.06 or Section 10A-2A-14.07.
(Act 2019-94, §1.)
(a) The circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the corporation’s most recent registered office is located may dissolve a corporation:
(1) in a proceeding by the Attorney General if it is established that:
(i) the corporation obtained its certificate of incorporation through fraud; or
(ii) the corporation has continued to exceed or abuse the authority conferred upon it by law;
(2) in a proceeding by a stockholder if it is established that:
(i) the directors are deadlocked in the management of the corporate affairs, the stockholders are unable to break the deadlock, and irreparable injury to the corporation is threatened or being suffered, or the business and affairs of the corporation can no longer be conducted to the advantage of the stockholders generally, because of the deadlock;
(ii) the directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal or fraudulent;
(iii) the stockholders are deadlocked in voting power and have failed, for a period that includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have expired; or
(iv) the corporate assets are being misapplied or wasted;
(3) in a proceeding by a creditor if it is established that:
(i) the creditor’s claim has been reduced to judgment, the execution on the judgment returned unsatisfied, and the corporation is insolvent; or
(ii) the corporation has admitted in writing that the creditor’s claim is due and owing and the corporation is insolvent;
(4) in a proceeding by the corporation to have its voluntary dissolution continued under court supervision; or
(5) in a proceeding by a stockholder if the corporation has abandoned its business and has failed within a reasonable time to liquidate and distribute its assets and dissolve.
(b) Subsection (a)(2) shall not apply in the case of a corporation that, on the date of the filing of the proceeding, has a class or series of stock which is:
(1) a covered security under Section 18(b)(1)(A) or (B) of the Securities Act of 1933; or
(2) not a covered security, but is held by at least 2,000 stockholders.
(c) In subsection (a), “stockholder” means a record stockholder, a beneficial stockholder, and an unrestricted voting trust beneficial owner, and in subsection (b), “stockholder” means a record stockholder, a beneficial stockholder, and a voting trust beneficial owner.
(Act 2019-94, §1; Act 2020-73, §7; Act 2026-495, §1.)
(a) Venue for a proceeding by the attorney general to dissolve a corporation lies in circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the corporation’s most recent registered office is located. Venue for a proceeding brought by any other party named in Section 10A-2A-14.10(a) lies in circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the corporation’s most recent registered office is located.
(b) It is not necessary to make stockholders parties to a proceeding to dissolve a corporation unless relief is sought against them individually.
(c) A court in a proceeding brought to dissolve a corporation may issue injunctions, appoint a receiver or custodian during the proceeding with all powers and duties the court directs, take other action required to preserve the corporate assets wherever located, and carry on the business of the corporation until a full hearing can be held.
(d) Within 10 days of the commencement of a proceeding to dissolve a corporation under Section 10A-2A-14.10(a)(2), the corporation shall deliver to all stockholders, other than the petitioner, a notice stating that the stockholders are entitled to avoid the dissolution of the corporation by electing to purchase the petitioner’s stock under Section 10A-2A-14.14 and accompanied by a copy of Section 10A-2A-14.14.
(Act 2019-94, §1; Act 2020-73, §7.)
(a) Unless an election to purchase has been filed under Section 10A-2A-14.14, a court in a judicial proceeding brought to dissolve a corporation may appoint one or more receivers to wind up and liquidate, or one or more custodians to manage, the business and affairs of the corporation. The court shall hold a hearing, after notifying all parties to the proceeding and any interested persons designated by the court, before appointing a receiver or custodian. The court appointing a receiver or custodian has jurisdiction over the corporation and all of its property wherever located.
(b) The court may appoint an individual, corporation, foreign corporation, or eligible entity as a receiver or custodian, which, if a foreign corporation or foreign eligible entity, must be registered to do business in this state. The court may require the receiver or custodian to post bond, with or without sureties, in an amount the court directs.
(c) The court shall describe the powers and duties of the receiver or custodian in its appointing order, which may be amended from time to time. Among other powers:
(1) the receiver (i) may dispose of all or any part of the assets of the corporation wherever located, at a public or private sale; and (ii) may sue and defend in the receiver’s own name as receiver of the corporation in all courts of this state;
(2) the custodian may exercise all of the powers of the corporation, through or in place of its board of directors, to the extent necessary to manage the affairs of the corporation in the best interests of its stockholders and creditors. The receiver or custodian shall have such other powers and duties as the court may provide in the appointing order, which may be amended from time to time.
(d) The court during a receivership may redesignate the receiver a custodian and during a custodianship may redesignate the custodian a receiver.
(e) The court from time to time during the receivership or custodianship may order compensation paid and expenses paid or reimbursed to the receiver or custodian from the assets of the corporation or proceeds from the sale of the assets.
(Act 2019-94, §1.)
(a) If after a hearing the court determines that one or more grounds for judicial dissolution described in Section 10A-2A-14.10 exist, the court may enter a decree dissolving the corporation and specifying the effective date of the dissolution. If the court enters a decree dissolving the corporation, then the clerk of the court shall deliver a certified copy of the decree to the Secretary of State for filing.
(b) After entering the decree of dissolution, the court shall direct the winding-up and liquidation of the corporation’s business and affairs in accordance with Section 10A-2A-14.05 and the notification of claimants in accordance with Sections 10A-2A-14.06 and 10A-2A-14.07.
(Act 2019-94, §1; Act 2023-503, §3.)
(a) In a proceeding under Section 10A-2A-14.10(a)(2) to dissolve a corporation, the corporation may elect or, if it fails to elect, one or more stockholders may elect to purchase all stock owned by the petitioning stockholder at the fair value of the stock. An election pursuant to this section shall be irrevocable unless the court determines that it is equitable to set aside or modify the election.
(b) An election to purchase pursuant to this section may be filed with the court at any time within 90 days after the filing of the petition under Section 10A-2A-14.10(a)(2) or at a later time as the court in its discretion may allow. If the election to purchase is filed by one or more stockholders, the corporation shall, within 10 days thereafter, give written notice to all stockholders, other than the petitioner. The notice must state the name and number of shares of stock owned by the petitioner and the name and number of shares of stock owned by each electing stockholder and must advise the recipients of their right to join in the election to purchase stock in accordance with this section. Stockholders who wish to participate shall file notice of their intention to join in the purchase no later than 30 days after the effectiveness of the notice to them. All stockholders who have filed an election or notice of their intention to participate in the election to purchase thereby become parties to the proceeding and shall participate in the purchase in proportion to their ownership of stock as of the date the first election was filed, unless they otherwise agree or the court otherwise directs. After an election has been filed by the corporation or one or more stockholders, the proceeding under Section 10A-2A-14.10(a)(2) may not be discontinued or settled, nor may the petitioning stockholder sell or otherwise dispose of his or her stock, unless the court determines that it would be equitable to the corporation and the stockholders, other than the petitioner, to permit the discontinuance, settlement, sale, or other disposition.
(c) If, within 60 days of the filing of the first election, the parties reach agreement as to the fair value and terms of purchase of the petitioner’s stock, the court shall enter an order directing the purchase of the petitioner’s stock upon the terms and conditions agreed to by the parties.
(d) If the parties are unable to reach an agreement as provided for in subsection (c), the court, upon application of any party, shall stay the proceedings under Section 10A-2A-14.10(a)(2) and determine the fair value of the petitioner’s stock as of the day before the date on which the petition under Section 10A-2A-14.10(a)(2) was filed or as of any other date as the court deems appropriate under the circumstances.
(e) Upon determining the fair value of the stock, the court shall enter an order directing the purchase upon terms and conditions as the court deems appropriate, which may include payment of the purchase price in installments, where necessary in the interests of equity, provision for security to assure payment of the purchase price and any additional expenses as may have been awarded, and, if the stock is to be purchased by stockholders, the allocation of stock among them. In allocating the petitioner’s stock among holders of different classes or series of stock, the court should attempt to preserve the existing distribution of voting rights among holders of different classes or series insofar as practicable and may direct that holders of a specific class or classes or series shall not participate in the purchase. Interest may be allowed at the rate and from the date determined by the court to be equitable, but if the court finds that the refusal of the petitioning stockholder to accept an offer of payment was arbitrary or otherwise not in good faith, no interest shall be allowed. If the court finds that the petitioning stockholder had probable grounds for relief under Section 10A-2A-14.10(a)(2)(ii) or (iv), it may award expenses to the petitioning stockholder.
(f) Upon entry of an order under subsection (c) or (e), the court shall dismiss the petition to dissolve the corporation under Section 10A-2A-14.10(a)(2), and the petitioning stockholder shall no longer have any rights or status as a stockholder of the corporation, except the right to receive the amounts awarded by the order of the court which shall be enforceable in the same manner as any other judgment.
(g) The purchase ordered pursuant to subsection (e) shall be made within 10 days after the date the order becomes final.
(h) Any payment by the corporation pursuant to an order under subsections (c) or (e), other than an award of expenses pursuant to subsection (e), is subject to the provisions of Section 10A-2A-6.40.
(Act 2019-94, §1.)
Assets of a dissolved corporation that should be transferred to a creditor, claimant, or stockholder of the corporation who cannot be found or who is not competent to receive them shall be reduced to cash and deposited with the State Treasurer or other appropriate state official for safekeeping. When the creditor, claimant, or stockholder furnishes satisfactory proof of entitlement to the amount deposited, the State Treasurer or other appropriate state official shall pay that person or his or her representative that amount.
(Act 2019-94, §1.)
(a) The law of the jurisdiction of formation of a foreign corporation governs:
(1) the incorporation and internal affairs of the foreign corporation;
(2) the liability of its stockholders as stockholders for the debts, obligations, or other liabilities of the foreign corporation; and
(3) the authority of the directors and officers of the foreign corporation.
(b) A foreign corporation is not precluded from registering to do business in this state because of any difference between the law of the foreign corporation’s jurisdiction of formation and the law of this state.
(Act 2019-94, §1.)
The term “foreign corporation,” as used in this division, shall mean:
(1) Any bank or other corporation now or hereafter organized or existing under the laws of any state of the United States other than this state; and
(2) Any national banking association or other corporation organized under the laws of the United States having its principal place of business in any state of the United States other than this state.
(Act 2019-94, §1.)
(a) Any foreign corporation may act in this state as trustee, personal representative, executor, administrator of any kind, guardian, conservator, or in any other like or similar fiduciary capacity, whether the appointment is by law, will, deed, inter vivos trust, mortgage, deed of trust, court order or otherwise, without the necessity of complying with any law of this state relating to the qualification of foreign corporations to do business in this state or the licensing of foreign corporations to do business in this state and notwithstanding any prohibition, limitation, or restriction contained in any law of this state subject to the following conditions:
(1) The foreign corporation is authorized to act in a fiduciary capacity, or capacities, in the state in which it is incorporated or, if the foreign corporation is a national banking association or other corporation organized under the laws of the United States, in the state in which it has its principal place of business.
(2) Any bank or other corporation organized under the laws of this state or a national banking association or other corporation organized under the laws of the United States having its principal place of business in this state which is authorized to act in a fiduciary capacity in this state is authorized to act in a like fiduciary capacity in the other state without the necessity of complying with any law of the other state relating to the qualification of a foreign corporation to do business in the other state.
(b) Nothing contained in this division shall be construed to prohibit or make unlawful any activity in this state by a bank or other corporation which is not incorporated under the laws of this state, or, if a national bank or other corporation organized under the laws of the United States, which does not have its principal place of business in this state which would be lawful in the absence of this division.
(Act 2019-94, §1.)
Prior to the time when any foreign corporation acts pursuant to the authority of this article in any fiduciary capacity or capacities in this state, the foreign corporation shall file with the Commissioner of Revenue of this state a verified statement which shall state:
(1) The correct corporate name of the foreign corporation;
(2) The name of the state under the laws of which it is incorporated or if the foreign corporation is a national banking association or other corporation organized under the laws of the United States shall state that fact;
(3) The address of its principal business office;
(4) In what fiduciary capacity, or capacities, it desires to act in the State of Alabama;
(5) That it is authorized to act in a similar fiduciary capacity or capacities in the state in which it is incorporated or, if it is a national banking association or other corporation organized under the laws of the United States, in which it has its principal place of business; and
(6) The statement shall irrevocably appoint the Commissioner of Revenue of Alabama as its true and lawful attorney to receive service of process in any action or proceeding against it relating to or growing out of any trust, estate, or matter in respect of which the foreign corporation may act in this state in any fiduciary capacity. The statement shall be verified by an officer of the foreign corporation, and there shall be filed with it the certificates of public officials and copies of documents certified by public officials as may be necessary to show that the foreign corporation is authorized to act in a fiduciary capacity or capacities similar to those in which it desires to act in this state, in the state in which it is incorporated, or, if it is a national banking association or other corporation organized under the laws of the United States, in which it has its principal place of business.
(Act 2019-94, §1.)
A foreign corporation, insofar as it acts in a fiduciary capacity in this state pursuant to the provisions of this division, shall not be deemed to be transacting business in this state, but no foreign corporation acting in a fiduciary capacity in this state pursuant to the provisions of this division without registering to transact business in this state pursuant to this title or other applicable provisions of law shall establish or maintain in this state a place of business, branch office, or agency for the conduct of business as a fiduciary. Nothing contained in this division shall diminish the authority of out-of-state banks and trust companies to establish or acquire and maintain trust offices or representative trust offices, or both, under the provisions of Chapter 11A of Title 5.
(Act 2019-94, §1.)
The provisions of this division shall not prohibit any foreign corporation authorized to act in a fiduciary capacity or capacities in the state in which it is incorporated or any national banking association or other corporation organized under the laws of the United States authorized to act in a fiduciary capacity or capacities in its principal place of business which, prior to April 14, 1956, or in the case of a corporation other than a national banking association, prior to January 1, 1995, was acting or appointed to act in this state in a particular fiduciary capacity or capacities, from continuing in the performance of the fiduciary activity or activities without complying with the provisions of this division.
(Act 2019-94, §1.)
Every foreign corporation acting in a fiduciary capacity in this state pursuant to the terms of this division shall be deemed to consent to service of all legal process in any action or proceeding against it and to service of any notice or demand permitted or required by law relating to or growing out of any trust, estate, or matter in respect of which the foreign corporation shall have acted in this state in any fiduciary capacity pursuant to any means of service of process provided in Section 10A-1-5.31, Section 10A-1-5.35, or Section 10A-1-5.36.
(Act 2019-94, §1.)
(a) A corporation shall maintain the following records:
(1) its certificate of incorporation as currently in effect;
(2) any notices to stockholders referred to in Section 10A-2A-1.20(c)(5) specifying facts on which a filed document is dependent if those facts are not included in the certificate of incorporation or otherwise available as specified in Section 10A-2A-1.20(c)(5);
(3) its bylaws as currently in effect;
(4) all written communications within the past three years to stockholders generally;
(5) minutes of all meetings of, and records of all actions taken without a meeting by, its stockholders, its board of directors, and board committees established under Section 10A-2A-8.25; and
(6) a list of the names and business addresses of its current directors and officers.
(b) A corporation shall maintain all annual financial statements prepared for the corporation for its last three fiscal years (or any shorter period of existence) and any audit or other reports with respect to those financial statements.
(c) A corporation shall maintain accounting records in a form that permits preparation of its financial statements.
(d) A corporation shall maintain a record of its current stockholders in alphabetical order by class or series of stock showing the address of each stockholder to which notices and other communications from the corporation are to be sent, and which shall include the number and class or series of stock held by each stockholder. In addition, if a stockholder has provided an electronic mail address to the corporation or has consented to receive notices or other communications by electronic mail or other electronic transmission, the record of stockholders shall include the electronic mail or other electronic transmission address of the stockholder if notices or other communications are being delivered by the corporation to the stockholder at that electronic mail or other electronic transmission address pursuant to Section 10A-2A-1.41(d). An electronic mail address of a stockholder shall be deemed to be provided by a stockholder if it is contained in a communication to the corporation by or on behalf of the stockholder, unless the communication expressly indicates that the electronic mail address may not be used to deliver notices or other communications.
(e) A corporation shall maintain the records specified in this section in a manner so that they may be made available for inspection within a reasonable time.
(Act 2019-94, §1; Act 2021-299, §3; Act 2024-213, §1.)
Subject to subsections (i) and (j) of this section:
(a) A stockholder of a corporation is entitled to inspect and copy, during regular business hours at the corporation’s principal office, any of the records of the corporation described in Section 10A-2A-16.01(a), excluding minutes of meetings of, and records of actions taken without a meeting by, the corporation’s board of directors and board committees established under Section 10A-2A-8.25, if the stockholder gives the corporation a signed written notice of the stockholder’s demand at least five business days before the date on which the stockholder wishes to inspect and copy and the demand provides the information required in subsection (h) if the stockholder is not a record stockholder as defined in clause (i) of the definition of record stockholder in Section 10A-2A-1.40.
(b) A stockholder of a corporation is entitled to inspect and copy, during regular business hours at a reasonable location specified by the corporation, any of the following records of the corporation if the stockholder meets the requirements of subsection (c) and gives the corporation a signed written notice of the stockholder’s demand at least five business days before the date on which the stockholder wishes to inspect and copy:
(1) the financial statements of the corporation maintained in accordance with Section 10A-2A-16.01(b); provided, however, that the corporation may deliver or make available the financial statements to the requesting stockholder by posting them on the corporation’s website or by other generally recognized means. If financial statements have been prepared for the corporation on the basis of generally accepted accounting principles for that specified period, the corporation shall deliver or make available those financial statements to the requesting stockholder. If the annual financial statements to be delivered or made available to the requesting stockholder are audited or otherwise reported upon by a public accountant, the report shall also be delivered or made available to the requesting stockholder. The corporation may also fulfill its responsibilities under this section by delivering the specified financial statements, or otherwise making them available, in any manner permitted by the applicable rules and regulations of the United States Securities and Exchange Commission;
(2) the accounting records of the corporation maintained in accordance with Section 10A-2A-16.01(c) that permitted the preparation of the financial statements maintained in accordance with Section 10A-2A-16.01(b);
(3) excerpts from minutes of any meeting of, or records of any actions taken without a meeting by, the corporation’s board of directors and board committees maintained in accordance with Section 10A-2A-16.01(a); and
(4) the record of stockholders maintained in accordance with Section 10A-2A-16.01(d); provided however, the corporation may withhold the record of stockholders maintained in accordance with Section 10A-2A-16.01(d) if the demanding stockholder of the corporation has, without the consent of the corporation, within two years preceding the stockholder’s demand sold or offered for sale any list of the stockholders of the corporation or has aided or abetted any person in selling or offering to sell any list of the stockholders of the corporation.
(c)(1) A stockholder may inspect and copy the records described in subsection (b) only if:
(i) the stockholder has delivered to the corporation a signed written notice of the stockholder’s demand at least five business days before the date on which the stockholder wishes to inspect and copy;
(ii) the stockholder’s demand provides the information required in subsection (h) if the stockholder is not a record stockholder as defined in clause (i) of the definition of record stockholder in Section 10A-2A-1.40;
(iii) the stockholder’s demand is made in good faith and for a proper purpose;
(iv) the stockholder’s demand describes with reasonable particularity the stockholder’s purpose and the records the stockholder desires to inspect; and
(v) the records are directly related to the stockholder’s purpose.
(2) For purposes of this subsection (c), a proper purpose shall mean a purpose directly related to the stockholder’s interest as a stockholder; provided, however, that a demand shall not be for a proper purpose if the corporation reasonably determines that the demand is in connection with:
(i) an active or pending derivative proceeding in the right of the corporation under Division D of Article 7 of this chapter that is or is expected to be instituted or maintained by the stockholder or the stockholder’s affiliate; or
(ii) an active or pending civil lawsuit to which the corporation, or its affiliate, and the stockholder, or the stockholder’s affiliate, are, or are expected to be, adversarial named parties.
(d) The corporation may redact portions of the records to be inspected and copied under subsections (a) and (b) to the extent the portions so redacted are not directly related to the stockholder’s purpose. The corporation may also impose reasonable restrictions and conditions on access to and use of the records to be inspected and copied under subsections (a) and (b), including designating information confidential and imposing nondisclosure and safeguarding, and may further keep confidential from its stockholders and other persons, for a period of time as the corporation deems reasonable any information that the corporation reasonably believes to be in the nature of a trade secret or other information the disclosure of which the corporation in good faith believes is not in the best interest of the corporation or could damage the corporation or its business or affairs, or that the corporation is required by law or by agreement with a third party to keep confidential. In any dispute concerning the reasonableness of a restriction under this subsection, the corporation has the burden of proving reasonableness.
(e) For any meeting of stockholders for which the record date for determining stockholders entitled to vote at the meeting is different than the record date for notice of the meeting, any person who becomes a stockholder subsequent to the record date for notice of the meeting and is entitled to vote at the meeting is entitled to obtain from the corporation upon request the notice and any other information provided by the corporation to stockholders in connection with the meeting, unless the corporation has made that information generally available to stockholders by posting it on its website or by other generally recognized means. Failure of a corporation to provide that information does not affect the validity of action taken at the meeting.
(f) The right of inspection granted by this section may not be abolished or limited by a corporation’s certificate of incorporation or bylaws, but the right of inspection granted by this section may be limited to the extent permitted under Section 10A-2A-7.32.
(g) This section does not affect
the right of a stockholder to inspect records under Section 10A-2A-7.20 or, if the stockholder is in litigation with the corporation, to the same extent as any other litigant.
(h) For purposes of this section, “stockholder” means a record stockholder, a beneficial stockholder, and an unrestricted voting trust beneficial owner. If a stockholder is not a record stockholder as defined in clause (i) of the definition of record stockholder in Section 10A-2A-1.40, the demand described in subsections (a) and (b) shall state the person’s status as a beneficial stockholder or an unrestricted voting trust beneficial owner, be accompanied by documentary evidence thereof, and state that such documentary evidence is a true and correct copy of what it purports to be.
(i) The right of a stockholder to inspect and copy the records described in subsections (a) and (b) may be denied by the corporation if the corporation determines that the demanding stockholder has within two years preceding his, her, or its demand improperly used any information secured through any prior examination of the records of the corporation.
(j) The right to inspect and copy the records described in subsections (a) and (b) shall not be available for any stockholder of a corporation that has been subject to the filing requirements pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, 15 U.S.C. §§ 78m or 78o(d) for at least the preceding 12 months and the corporation has filed with the Securities and Exchange Commission all reports required to be filed thereunder; provided, however, the corporation shall provide the requesting stockholder with the information regarding the stockholders of the corporation as may be required by the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
(Act 2019-94, §1; Act 2026-495, §1.)
If a stockholder is entitled to inspection and copying rights under Section 10A-2A-16.02:
(a) A stockholder may appoint an agent or attorney to exercise the stockholder’s inspection and copying rights under Section 10A-2A-16.02. In that case, the demand shall be accompanied by a power of attorney or other writing which authorizes the agent or attorney to so act on behalf of the stockholder.
(b) The corporation may, if reasonable, satisfy the right of a stockholder to copy records under Section 10A-2A-16.02 by furnishing to the stockholder copies by photocopy or other means chosen by the corporation, including furnishing copies through an electronic transmission.
(c) The corporation may comply at its expense with a stockholder’s demand to inspect the record of stockholders under Section 10A-2A-16.02(b)(4) by providing the stockholder with a list of stockholders that was compiled no earlier than the date of the stockholder’s demand.
(d) The corporation may impose a reasonable charge to cover the costs of providing copies of documents to the stockholder, which may be based on an estimate of those costs.
(Act 2019-94, §1; Act 2026-495, §1.)
If a stockholder is entitled to inspection and copying rights under Section 10A-2A-16.02:
(a) If a corporation does not allow a stockholder who complies with Section 10A-2A-16.02(a) to inspect and copy any records required by that section to be available for inspection, the designated court, and if none, the circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the corporation’s most recent registered office is located may summarily order inspection and copying of the records demanded at the corporation’s expense upon application of the stockholder.
(b) If a corporation does not within a reasonable time allow a stockholder who complies with Section 10A-2A-16.02(b) to inspect and copy the records required by that section, the stockholder who complies with Section 10A-2A-16.02(c) may apply to the designated court, and if none, the circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the corporation’s most recent registered office is located for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this subsection on an expedited basis.
(c) If the court orders inspection and copying of the records demanded under Section 10A-2A-16.02(b), it may impose reasonable restrictions on their confidentiality, use, or distribution by the demanding stockholder and it shall also order the corporation to pay the stockholder’s expenses incurred to obtain the order unless the corporation establishes that it refused inspection in good faith because the corporation had:
(1) a reasonable basis for doubt about the right of the stockholder to inspect the records demanded; or
(2) required reasonable restrictions on the confidentiality, use, or distribution of the records demanded to which the demanding stockholder had been unwilling to agree. If the corporation has declined to deliver or make available the records because the stockholder had been unwilling to agree to restrictions proposed by the corporation on the confidentiality, use, or distribution of the records, the corporation shall have the burden of demonstrating that the restrictions proposed by the corporation were reasonable.
(Act 2019-94, §1; Act 2020-73, §7; Act 2026-495, §1.)
(a) A director of a corporation is entitled to inspect and copy the books, records, and documents of the corporation at any reasonable time to the extent reasonably related to the performance of the director’s duties as a director, including duties as a member of a board committee, but not for any other purpose or in any manner that would violate any duty to the corporation.
(b) The designated court, and if none, the circuit court for the county in which the corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the corporation’s most recent registered office is located may order inspection and copying of the books, records, and documents at the corporation’s expense, upon application of a director who has been refused inspection rights, unless the corporation establishes that the director is not entitled to inspection rights. The court shall dispose of an application under this subsection on an expedited basis.
(c) If an order is issued, the court may include provisions protecting the corporation from undue burden or expense, and prohibiting the director from using information obtained upon exercise of the inspection rights in a manner that would violate a duty to the corporation, and may also order the corporation to reimburse the director for the director’s expenses incurred in connection with the application.
(Act 2019-94, §1; Act 2020-73, §7.)
[Repealed]
THIS SECTION WAS REPEALED BY ACT 2026-495, EFFECTIVE AUGUST 1, 2026.
(Act 2019-94, §1; Act 2020-73, §7; Act 2026-495, §5.)
[Repealed]
REPEALED BY ACT 2024-213, EFFECTIVE OCTOBER 1, 2024.
(Act 2019-94, §1.)
(a) A corporation electing to become a benefit corporation under this article in the manner prescribed in this article is subject in all respects to the provisions of this chapter, except to the extent this article imposes additional or different requirements, in which case those requirements apply. The inclusion of a provision in this article does not imply that a contrary or different rule of law applies to a corporation that is not a benefit corporation. This article does not affect a statute or rule of law that applies to a corporation that is not a benefit corporation.
(b) As used in this article:
(1) BENEFIT CORPORATION means a corporation that includes in its certificate of incorporation a statement that the corporation is subject to this article.
(2) PUBLIC BENEFIT means a positive effect, or reduction of negative effects, on one or more communities or categories of persons (other than stockholders solely in their capacity as stockholders) or on the environment, including effects of an artistic, charitable, economic, educational, cultural, literary, medical, religious, social, ecological, or scientific nature.
(3) PUBLIC BENEFIT PROVISION means a provision in the certificate of incorporation which states that the corporation shall pursue one or more identified public benefits.
(4) RESPONSIBLE AND SUSTAINABLE MANNER means a manner that:
(i) pursues through the business of the corporation the creation of a positive effect on society and the environment, taken as a whole, that is material taking into consideration the corporation’s size and the nature of its business; and
(ii) considers, in addition to the interests of stockholders generally, the separate interests of stakeholders known to be affected by the conduct of the business of the corporation.
(Act 2020-73, §8.)
(a) The name of a benefit corporation must comply with Section 10A-1-5.04(e).
(b) Any stock certificate issued by a benefit corporation, and any information statement delivered by a benefit corporation pursuant to Section 10A-2A-6.26(b), must note conspicuously that the corporation is a benefit corporation subject to this chapter.
(Act 2020-73, §8.)
(a) Unless the certificate of incorporation requires a greater vote, in addition to any other approval of stockholders required under this chapter, the approval of at least two-thirds of the votes entitled to be cast thereon, and, if any class or series of stock is entitled to vote as a separate group thereon, the approval of at least two-thirds of the votes entitled to be cast by that voting group, shall be required for a corporation that is not a benefit corporation to:
(1) amend its certificate of incorporation to include a statement that it is subject to this article; or
(2)(i) merge with or into another entity, or effect a conversion, if, as a result of the merger or conversion, the stock of any voting group would become, or be converted into or exchanged for the right to receive, stock of a benefit corporation or stock or interests in an entity subject to provisions of organic law analogous to those in this article; provided, however, that in the case of this subsection (a)(2)(i), if the stock of one or more, but not all, voting groups are so affected, then only the stock in the voting groups so affected shall be entitled to cast votes under this subsection (a).
(ii) enter into a stock exchange with another corporation or foreign corporation, if, as a result of the stock exchange, the stock of any voting group would become, or be converted into or exchanged for the right to receive, stock of a benefit corporation or a foreign benefit corporation subject to provisions of organic law analogous to those in this article; provided, however, that in the case of this subsection (a)(2)(ii), if the stock of one or more, but not all, voting groups are so affected, then only the stock in the voting groups so affected shall be entitled to cast votes under this subsection (a).
(b) Unless the certificate of incorporation requires a greater vote, in addition to any other approval of stockholders required under this chapter, the approval of at least two-thirds of the votes entitled to be cast thereon, and, if any class or series of stock entitled to vote as a separate group thereon, the approval of at least two-thirds of the votes entitled to be cast by that voting group, shall be required for a benefit corporation to:
(1) amend its certificate of incorporation to eliminate a statement that the corporation is subject to this article; or
(2)(i) merge with or into, another entity, or effect a conversion if, as a result of the merger or conversion, the stock of any voting group would become, or be converted into or exchanged for the right to receive, stock or interests in an entity that is neither a benefit corporation nor an entity subject to provisions of organic law analogous to those in this article; provided, however, that in the case of this subsection (b)(2)(i), if the stock of one or more, but not all, voting groups are so affected, then only the stock in the voting groups so affected shall be entitled to cast votes under this subsection (b).
(ii) enter into a stock exchange with another corporation or foreign corporation if, as a result of the stock exchange, the stock of any voting group would become, or be converted into or exchanged for the right to receive, stock or interests in a corporation or foreign corporation that is neither a benefit corporation nor a foreign benefit corporation subject to provisions of organic law analogous to those in this article; provided, however, that in the case of this subsection (b)(2)(ii), if the stock of one or more, but not all, voting groups are so affected, then only the stock in the voting groups so affected shall be entitled to cast votes under this subsection (b).
(Act 2020-73, §8.)
(a) Each member of the board of directors of a benefit corporation, when discharging the duties of a director, shall act: (i) in a responsible and sustainable manner, and (ii) in a manner that pursues the public benefit or benefits identified in any public benefit provision.
(b) In fulfilling the duties under subsection (a), a director shall consider, to the extent affected, in addition to the interests of stockholders generally, the separate interests of stakeholders known to be affected by the business of the corporation including:
(1) the employees and work forces of the corporation, its subsidiaries, and its suppliers;
(2) customers;
(3) communities or society, including those of each community in which offices or facilities of the corporation, its subsidiaries, or its suppliers are located; and
(4) the local and global environment.
(c) A director of a benefit corporation shall not, by virtue of the duties imposed by subsections (a) and (b), owe any duty to a person other than the benefit corporation due to any interest of the person in the status of the corporation as a benefit corporation or in any public benefit provision.
(d) Unless otherwise provided in the certificate of incorporation, the violation by a director of the duties imposed by subsections (a) and (b) shall not constitute an intentional infliction of harm on the corporation or the stockholders for purposes of Section 10A-2A-2.02(b)(4) and (5).
(Act 2020-73, §8.)
(a) No less than annually, a benefit corporation shall prepare a benefit report addressing the efforts of the corporation during the preceding year to operate in a responsible and sustainable manner, to pursue any public benefit or benefits identified in any public benefit provision, and to consider the interests described in Section 10A-2A-17.04(b). The annual benefit report must include:
(1) the objectives that the board of directors has established for the corporation to operate in a responsible and sustainable manner, to pursue the public benefit or benefits identified in any public benefit provision, and to consider the interests described in Section 10A-2A-17.04(b);
(2) the standards the board of directors has adopted to measure the corporation’s progress in operating in a responsible and sustainable manner, in pursuing the public benefit or benefits identified in any public benefit provision, and in considering the interests described in Section 10A-2A-17.04(b);
(3) if the certificate of incorporation or bylaws require that the corporation use an independent third-party standard in reporting on the corporation’s progress in operating in a responsible and sustainable manner, in pursuing the public benefit or benefits identified in any public benefit provision, or in considering the interests described in Section 10A-2A-17.04(b), or if the board of directors has chosen to use such a standard, the applicable standard so required or chosen; and
(4) an assessment of the corporation’s success in meeting the objectives and standards identified in subsections (a)(1) and (a)(2) and, if applicable, subsection (a)(3), and the basis for that assessment.
(b) The benefit corporation shall deliver to each stockholder, or make available and provide written notice to each stockholder of the availability of, the annual benefit report required by subsection (a) on or before the earlier of:
(1) 120 days following the end of the fiscal year of the benefit corporation; or
(2) the time that the benefit corporation delivers any other annual reports or annual financial statements to its stockholders.
(c) Any stockholder that has not received or been given access to an annual benefit report within the time required by subsection (b) may make a written request that the corporation deliver or make available the annual benefit report to the stockholder. If a benefit corporation does not deliver or make available an annual benefit report to the stockholder within five business days of receiving such request, the requesting stockholder may apply to the designated court, and if none, to the circuit court of the county where the corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the corporation’s most recent registered office is located for an order requiring delivery of or access to the annual benefit report. The court shall dispose of an action under this subsection (c) on an expedited basis.
(d) A benefit corporation shall post all of its annual benefit reports on the public portion of its website, if any. If a benefit corporation does not have a website, the benefit corporation shall provide a copy of its most recent annual benefit report, without charge, to any person that requests a copy in writing.
(Act 2020-73, §8.)
(a) Except in a proceeding authorized under Section 10A-2A-17.05(c) or this section, no person other than the corporation, or a stockholder in the right of the corporation pursuant to subsection (b), may bring an action or assert a claim with respect to the violation of any duty applicable to a benefit corporation or any of its directors under this article.
(b) Except for a proceeding brought under Section 10A-2A-17.05(c), a proceeding by a stockholder of a benefit corporation claiming violation of any duty applicable to a benefit corporation or any of its directors under this article:
(1) must be brought in a derivative proceeding pursuant to Division D of Article 7 of this chapter; and
(2) may be brought only by a stockholder of the benefit corporation that at the time of the act or omission complained of either individually, or together with other stockholders bringing such action collectively, owned directly or indirectly at least five percent of a class of the corporation’s outstanding stock or, in the case of a corporation with stock traded on an organized market as described in Section 10A-2A-13.02(b)(1)(i), either that percentage of shares of stock or shares of stock with a market value of at least $5 million at the time the proceeding is commenced.
(c) A suit under subsection (b) may not be maintained if, during the pendency of the suit, the stockholder individually fails, or the stockholders collectively fail, to continue to own directly or indirectly the lesser of (i) the number of shares of stock at the time the proceeding is commenced, (ii) a number of shares of stock representing five percent of a class of the corporation’s stock, or (iii) a number of shares of stock with a market value of at least $5 million.
(Act 2020-73, §8.)
(a) Before January 1, 2021, this chapter governs only:
(1) a corporation incorporated on or after January 1, 2020; and
(2) a corporation incorporated before January 1, 2020, which elects, by amending or restating that corporation’s certificate of incorporation, to be governed by this chapter.
(b) On and after January 1, 2021, this chapter governs all existing corporations incorporated under:
(1) any general or special law of this state providing for the incorporation of corporations for a purpose or purposes for which a corporation might be incorporated under this chapter, where the power has been reserved to amend, repeal, or modify the law under which the corporation was incorporated; and
(2) any predecessor statute hereto.
(c) For purposes of applying this chapter to a corporation incorporated before January 1, 2020:
(1) the corporation’s incorporation document, whether a certificate of incorporation, certificate of formation, charter, or articles of incorporation is deemed to be the corporation’s certificate of incorporation;
(2) the corporation’s bylaws are deemed to be the corporation’s bylaws;
(3) any amendment or restatement of a corporation’s certificate of incorporation or bylaws on or after January 1, 2020, shall conform with this chapter; and
(4) all filing instruments to be delivered for filing by or on behalf of a corporation on or after January 1, 2020, shall conform with this chapter and shall be delivered for filing to the filing officer in accordance with Article 4, commencing with Section 10A-1-4.01, of Chapter 1.
(d) No corporation may be incorporated after December 31, 2019, pursuant to Sections 10A-2-1.01 to 10A-2-17.02, inclusive.
(Act 2019-94, §1; §10A-2A-17.01; amended and renumbered by Act 2020-73, §9.)
A foreign corporation registered or authorized to transact business in this state on January 1, 2020, is subject to this chapter and is deemed to be registered to transact business in this state, and is not required to renew its registration to transact business under Article 7, commencing with Section 10A-1-7.01, of Chapter 1, except as Article 7, commencing with Section 10A-1-7.01, of Chapter 1 requires.
(Act 2019-94, §1; §10A-2A-17.02; amended and renumbered by Act 2020-73, §9.)
(a) Except as provided in subsection (b), the repeal of a statute by this chapter does not affect:
(1) the operation of the statute or any action taken under it before its repeal;
(2) any ratification, right, remedy, privilege, obligation, or liability acquired, accrued, or incurred under the statute before its repeal;
(3) any violation of the statute, or any penalty, forfeiture, or punishment incurred because of the violation, before its repeal; or
(4) any proceeding, reorganization, or dissolution commenced under the statute before its repeal, and the proceeding, reorganization, or dissolution may be completed in accordance with the statute as if it had not been repealed.
(b) If a penalty or punishment imposed for violation of a statute repealed by this chapter is reduced by this chapter, the penalty or punishment, if not already imposed, shall be imposed in accordance with this chapter.
(Act 2019-94, §1; §10A-2A-17.03; renumbered by Act 2020-73, §9.)
If any provision of this chapter or its application to any person or circumstance is held invalid by a court of competent jurisdiction, the invalidity does not affect other provisions or applications of this chapter that can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.
(Act 2019-94, §1; §10A-2A-17.04; renumbered by Act 2020-73, §9.)
This chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. Section 7003(b).
(Act 2019-94, §1; §10A-2A-17.05; renumbered by Act 2020-73, §9.)
A corporation formed and existing under this chapter may conduct its business and affairs, carry on its operations, and have and exercise the powers granted by this chapter in any state, foreign country, or other jurisdiction.
(Act 2019-94, §1; §10A-2A-17.06; renumbered by Act 2020-73, §9.)
This chapter and the provisions of Chapter 1 to the extent applicable to nonprofit corporations may be cited as the “Alabama Nonprofit Corporation Law.”
(Acts 1984, No. 84-290, p. 502, §1; §10-3A-1; amended and renumbered by Act 2009-513, p. 967, §168.)
As used in this chapter, the following terms shall have the following meanings, respectively, unless the context otherwise requires:
(1) ARTICLES OF INCORPORATION. The original or restated articles of incorporation or articles of consolidation and all amendments thereto, including articles of merger, of a domestic or foreign nonprofit corporation. The term articles of incorporation of a nonprofit corporation constitutes its certificate of formation as defined in Chapter 1. The terms may be used interchangeably. The articles of incorporation or certificate of formation of a nonprofit corporation, together with its bylaws, constitute its governing documents as described in Chapter 1.
(2) BOARD OF DIRECTORS. The group of persons vested with the management of the affairs of the corporation irrespective of the name by which the group is designated. The board of directors of a nonprofit corporation is its governing authority as that term is defined in Chapter 1, unless the certificate of formation provides otherwise as provided in Section 10A-3-2.08.
(3) BYLAWS. The code or codes of rules adopted for the regulation or management of the affairs of the corporation irrespective of the name or names by which the rules are designated. The bylaws of a nonprofit corporation, together with its articles of incorporation or certificate of formation, constitute the nonprofit corporation’s governing documents as described in Chapter 1.
(4) ELECTRONIC MAIL means an electronic transmission directed to a unique electronic mail address.
(5) ELECTRONIC MAIL ADDRESS means a destination, commonly expressed as a string of characters, consisting of a unique user name or mailbox (commonly referred to as the “local part” of the address) and a reference to an internet domain (commonly referred to as the “domain part” of the address), whether or not displayed, to which electronic mail can be sent or delivered.
(6) FOREIGN NONPROFIT CORPORATION. A nonprofit corporation organized under laws other than the laws of Alabama.
(7) MEMBER. One having membership rights in a corporation in accordance with the provisions of its governing documents. A member may be a natural person, a partnership, a professional association or professional corporation, a corporation for profit or a nonprofit corporation.
(8) NONPROFIT CORPORATION. A nonprofit corporation no part of the income or profit of which is distributable to its members, directors, or officers.
(9) NONPROFIT CORPORATION or DOMESTIC NONPROFIT CORPORATION. A nonprofit corporation subject to the provisions of this chapter, except a foreign nonprofit corporation.
(10) VERIFIED. Supported by an affidavit or oath confirming the correctness, truth, or authenticity of the matter set forth therein.
(Acts 1984, No. 84-290, p. 502, §2; §10-3A-2; amended and renumbered by Act 2009-513, p. 967, §168; Act 2021-299, §3.)
(a) The provisions of this chapter relating to domestic nonprofit corporations shall apply to:
(1) All nonprofit corporations organized hereunder; and
(2) All nonprofit corporations heretofore organized under any act hereby or heretofore repealed, for a purpose or purposes for which a nonprofit corporation might be organized under this chapter.
(b) The provisions of this chapter relating to foreign nonprofit corporations shall apply to all foreign nonprofit corporations conducting affairs in Alabama for a purpose or purposes for which a nonprofit corporation might be organized under this chapter.
(c) Beginning May 1, 2004, the Young Men’s Christian Association (YMCA) of Mobile which was incorporated by Act 405 approved on February 18, 1895, shall be subject to this chapter. Prospectively from May 1, 2004, the YMCA of Mobile shall be entitled to all of the rights and privileges of a nonprofit corporation including, but not limited to, the right to amend its charter and bylaws as provided by this chapter.
(Acts 1984, No. 84-290, p. 502, §3; §10-3A-3; amended and renumbered by Act 2009-513, p. 967, §168.)
(a) Nonprofit corporations may be organized under this chapter for any lawful purpose or purposes, including, without being limited to, any one or more of the following purposes:
(1) Charitable,
(2) Benevolent,
(3) Eleemosynary,
(4) Educational,
(5) Civic,
(6) Patriotic,
(7) Political,
(8) Religious,
(9) Social,
(10) Fraternal,
(11) Literary,
(12) Cultural,
(13) Athletic,
(14) Scientific,
(15) Agricultural,
(16) Horticultural,
(17) Animal husbandry,
(18) Professional, commercial, industrial or trade association,
(19) Cemetery operation and maintenance, and
(20) Historical.
(b) Labor unions, cooperative organizations and organizations subject to any of the provisions of the insurance laws of Alabama may not be organized under this chapter.
(c) Whenever 10 or more retail merchants wish to form a nonprofit association, cooperative society, or corporation in the sense of paying interest or dividends on stock, but for mutual benefit through the application of cooperation or other economic principles, they may become a body corporate in the manner provided in this chapter.
(d) Whenever 10 or more wholesale merchants wish to form a nonprofit association, cooperative society, or corporation in the sense of paying interest or dividends on stock, but for mutual benefit through the application of cooperation or other economic principles, they may become a body corporate in the manner provided in this chapter.
(Acts 1984, No. 84-290, p. 502, §4; §10-3A-4; amended and renumbered by Act 2009-513, p. 967, §168.)
(a) A notice under this chapter must be in writing unless oral notice is reasonable in the circumstances. Unless otherwise agreed between the sender and the recipient, words in a notice or other communication under this chapter must be in English.
(b) A notice or other communication may be given by any method of delivery, except that notice or other communication by electronic transmission must be in accordance with this section. If the methods of delivery are impracticable, a notice or other communication from the nonprofit corporation may be given by means of a broad non-exclusionary distribution to the public (which may include a newspaper of general circulation in the area where published; radio, television, or other form of public broadcast communication; or other methods of distribution that the nonprofit corporation has previously identified to its recipients).
(c) A notice or other communication to a nonprofit corporation or to a foreign nonprofit corporation registered to transact business in this state may be delivered to the nonprofit corporation’s registered agent at its registered office or to the secretary at the nonprofit corporation’s principal office shown in its most recent annual report or, in the case of a foreign nonprofit corporation that has not yet delivered an annual report, in its foreign registration under Chapter 1.
(d) A notice or other communication from the nonprofit corporation to a member may be delivered by electronic mail to an electronic mail address for that member as reflected in the books and records of the nonprofit corporation, unless that member has previously notified the nonprofit corporation in writing that the member objects to receiving notices and other communications by electronic mail. The notice or other communication may be delivered to a member by another form of electronic transmission if consented to by that member or if authorized by subsection (j). Any notice or other communication from the nonprofit corporation to any other person may be delivered by electronic transmission if consented to by the recipient or if authorized by subsection (j). Any consent under this subsection or subsection (j) may be revoked with respect to future notices or communications by the person who consented by giving written or electronic notice to the person to whom the consent was delivered.
(e) A notice or other communication may no longer be delivered to an electronic mail address or other electronic transmission address pursuant to subsection (d) if (i) the nonprofit corporation receives notice from the information processing system into which the notice or other communication was entered that two consecutive notices or other communications given by electronic transmission have not been delivered to the electronic mail address or other electronic transmission address to which the notice or other communication was directed, and (ii) the notice of non-delivery becomes known to the secretary or an assistant secretary, or another person responsible for the giving of notices or other communications for the nonprofit corporation; provided, however, that the inadvertent failure to recognize the notice of non-delivery as a cessation of authority to provide a member with notice by electronic mail or other electronic transmission shall not invalidate any meeting or other action.
(f) Unless otherwise agreed between the sender and the recipient, a notice or other communication by electronic transmission is received when:
(1) it enters an information processing system directed to (i) in the case of a member, the electronic mail address for the member as reflected in the books and records of the nonprofit corporation or other electronic transmission address at which the member has consented to receive notice or other communication by electronic transmission, or (ii) in the case of any other recipient, the electronic transmission address at which the recipient has consented to receive notice or other communication by electronic transmission; and
(2) it is in a form capable of being processed by that system.
(g) Receipt of an electronic acknowledgement from an information processing system described in subsection (f)(1) establishes that an electronic transmission was received but, by itself, does not establish that the content sent corresponds to the content received.
(h) An electronic transmission is received under this section even if no person is aware of its receipt.
(i) A notice or other communication, if in a comprehensible form or manner, is effective at the earliest of the following:
(1) if in a physical form, the earliest of when it is actually received, or when it is left at:
(i) a member’s address reflected in the books and records of the nonprofit corporation;
(ii) a director’s residence or usual place of business; or
(iii) the nonprofit corporation’s principal office;
(2) if mailed by United States mail postage prepaid and addressed to a member at the member’s address reflected in the books and records of the nonprofit corporation, upon deposit in the United States mail;
(3) if mailed by United States mail postage prepaid and addressed to a recipient other than a member, at the address of the recipient reflected in the books and records of the nonprofit corporation, the earliest of when it is actually received, or:
(i) if sent by registered or certified mail, return receipt requested, the date shown on the return receipt signed by or on behalf of the addressee; or
(ii) five days after it is deposited in the United States mail;
(4) if sent by a nationally recognized commercial carrier that issues a receipt or other confirmation of delivery, the earliest of when it is actually received or the date shown on the receipt or other confirmation of delivery issued by the commercial carrier;
(5) if an electronic transmission, when it is received as provided in subsection (f); and
(6) if oral, when communicated.
(j) A notice or other communication may be in the form of an electronic transmission that cannot be directly reproduced in paper form by the recipient through an automated process used in conventional commercial practice only if (i) the electronic transmission is otherwise retrievable in perceivable form, and (ii) the sender and the recipient have consented in writing to the use of that form of electronic transmission.
(k) If this chapter prescribes requirements for notices or other communications in particular circumstances, those requirements govern. If the certificate of incorporation or bylaws prescribe requirements for notices or other communications, not inconsistent with this section or other provisions of this chapter, those requirements govern. The certificate of incorporation or bylaws may authorize or require delivery of notices of meetings of directors by electronic transmission.
(l) In the event that any provisions of this chapter are deemed to modify, limit, or supersede the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §§7001 et seq., the provisions of this chapter shall control to the maximum extent permitted by Section 102(a)(2) of that federal act.
(m) Whenever a notice or communication would otherwise be required to be given under any provision of this chapter to a member, the notice or communication need not be given if the nonprofit corporation is not permitted to deliver the notice or communication by electronic transmission pursuant to subsections (d) and (e) and:
(1) notices and communications to members of two consecutive annual meetings, and all notices and communications of meetings during the period between those two consecutive annual meetings, have been sent to that member at that member’s address as reflected in the books and records of the nonprofit corporation and have been returned undeliverable or could not be delivered; or
(2) no address has been provided to the nonprofit corporation by or on behalf of a member and the nonprofit corporation has not otherwise obtained an address for that member it believes to be reliable.
In addition if any member to which this subsection (m) applies delivers to the nonprofit corporation a written notice or communication setting forth that member’s then-current address, the requirement that notice and communication be given to that member shall be reinstated.
(n) Whenever a notice or communication is required to be given, under any provision of this chapter or of the certificate of incorporation or bylaws of any nonprofit corporation, to any person with whom notice to or communication with is unlawful, the giving of the notice or communication to that person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give the notice or communication to that person. Any action or meeting which shall be taken or held without notice or communication to the person with whom notice to or communication with is unlawful shall have the same force and effect as if the notice or communication had been duly given. In the event that the action taken by the nonprofit corporation is such as to require the filing of a certificate or other filing instrument under any of the other sections of this chapter, the certificate or other filing instrument shall state, if that is the fact and if notice or communication is required, that notice or communication was given to all persons entitled to receive notice or communication except those persons with whom notice to or communication with is unlawful.
(Act 2021-299, §4.)
(a) A nonprofit corporation may have one or more classes of members or may have no members. If the nonprofit corporation has one or more classes of members, the designation of the class or classes, the manner of election or appointment and the qualifications and rights of the members of each class shall be set forth in the governing documents. If the nonprofit corporation has no members, that fact shall be set forth in the certificate of formation. A nonprofit corporation may issue certificates evidencing membership therein.
(b) The members of the nonprofit corporation shall not be liable for obligations of the corporation.
(Acts 1984, No. 84-290, p. 502, §11; §10-3A-26; amended and renumbered by Act 2009-513, p. 967, §171.)
(a) Unless the board of directors determines to hold the meeting of the members solely by means of remote communication in accordance with subsections (d), (e), and (f), meetings of members may be held at the place, either within or without Alabama, as may be provided in the bylaws and, in the absence of any provision, all meetings shall be held at the registered office of the corporation in Alabama.
(b) An annual meeting of the members shall be held at the time as may be provided in the bylaws. Failure to hold the annual meeting at the designated time shall not work a forfeiture or dissolution of the corporation.
(c) Special meetings of the members may be called by the president or by the board of directors. Special meetings of the members may also be called by other officers or persons or number or proportion of members as may be provided in the governing documents. In the absence of a provision fixing the number or proportion of members entitled to call a meeting, a special meeting of members may be called by members having one-twentieth of the votes entitled to be cast at the meeting.
(d) Members may participate in any meeting of the members by means of remote communication to the extent the governing authority authorizes participation for that meeting. Participation as a member by means of remote communication shall be subject to guidelines and procedures as the governing authority adopts and shall be in conformity with this subsection.
(e) Members participating in a meeting of the members by means of remote communication shall be deemed present and may vote at that meeting if the corporation has implemented reasonable measures:
(1) to verify that each person participating remotely as a member is a member; and
(2) to provide members participating remotely a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to communicate, and to read or hear the proceedings of the meeting, substantially concurrently with the proceedings.
(f) Unless the certificate of incorporation or bylaws require the meeting of members to be held at a place, the governing authority may determine that any meeting of the members shall not be held at any place and shall instead be held solely by means of remote communication, but only if the corporation implements the measures specified in subsection (e).
(Acts 1984, No. 84-290, p. 502, §13; §10-3A-28; amended and renumbered by Act 2009-513, p. 967, §171; Act 2021-299, §5.)
Unless otherwise provided in the nonprofit corporation’s governing documents, notice stating the place, if any, day, and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, by or at the direction of the president, or the secretary, or the officers or persons calling the meeting, to each member entitled to vote at the meeting. If the board of directors has authorized participation by means of remote communication pursuant to Section 10A-3A-2.02(d), (e), and (f), the notice to the members must describe the means of remote communication to be used.
(Acts 1984, No. 84-290, p. 502, §14; §10-3A-29; amended and renumbered by Act 2009-513, p. 967, §171; Act 2021-299, §5.)
Whenever any notice is required to be given to any member or director of a corporation under the provisions of this title or this chapter or under the provisions of the nonprofit corporation’s governing documents, a waiver thereof in writing signed by the person or persons entitled to the notice, whether before or after the time stated therein, shall be equivalent to the giving of the notice.
(Acts 1984, No. 84-290, p. 502, §15; §10-3A-30; amended and renumbered by Act 2009-513, p. 967, §171.)
(a) The right of the members, or any class or classes of members, to vote may be limited, enlarged or denied to the extent specified in the nonprofit corporation’s governing documents. Unless so limited, enlarged or denied, each member, regardless of class, shall be entitled to one vote on each matter submitted to a vote of members.
(b) A member entitled to vote may vote in person or, unless the nonprofit corporation’s governing documents otherwise provide, may vote by proxy executed in writing by the member, or by his or her duly authorized attorney-in-fact. No proxy shall be valid after 11 months from the date of its execution, unless otherwise provided in the proxy. Where directors or officers are to be elected by members, the bylaws may provide that the elections may be conducted by mail.
(c) The governing documents of a nonprofit corporation may provide that in all elections of directors every member entitled to vote shall have the right to cumulate his or her vote and to give one candidate a number of votes equal to his or her vote multiplied by the number of directors to be elected, or by distributing the votes on the same principle among any number of the candidates.
(d) If a nonprofit corporation has no members or its members have no right to vote, the directors shall have the sole voting power.
(Acts 1984, No. 84-290, p. 502, §16; §10-3A-31; amended and renumbered by Act 2009-513, p. 967, §171.)
The bylaws may provide the number or percentage of members entitled to vote represented in person or by proxy, or the number or percentage of votes represented in person or by proxy, which shall constitute a quorum at a meeting of members. In the absence of any provision, members holding one-tenth of the votes entitled to be cast on the matter to be voted upon, represented in person or by proxy, shall constitute a quorum. A majority of the votes entitled to be cast on a matter to be voted upon by the members present or represented by proxy at a meeting at which a quorum is present shall be necessary for any action to be taken unless a greater proportion is required by this title or this chapter or by the nonprofit corporation’s governing documents.
(Acts 1984, No. 84-290, p. 502, §17; §10-3A-32; amended and renumbered by Act 2009-513, p. 967, §171.)
Whenever, with respect to any action to be taken by the members or directors of a nonprofit corporation, the governing documents of the nonprofit corporation require the vote or concurrence of a greater proportion of the directors or members or any class of members than required by this title or this chapter, the provisions of the governing documents shall control.
(Acts 1984, No. 84-290, p. 502, §18; §10-3A-33; amended and renumbered by Act 2009-513, p. 967, §171.)
(a) All corporate powers shall be exercised by or under authority of, and the business and affairs of a nonprofit corporation shall be managed under the direction of a board of directors except as may be otherwise provided in this chapter or the certificate of formation. If any provision is made in the certificate of formation, the power and duties conferred or imposed upon the board of directors by this chapter shall be exercised or performed to the extent and by the governing authority as shall be provided in the certificate of formation. Directors shall be natural persons but need not be residents of Alabama unless the governing documents so require. The governing documents may prescribe other qualifications for directors. The board of directors shall have authority to fix the compensation of directors unless otherwise provided in the certificate of formation.
(b) The directors of the corporation shall not, as such, be liable for obligations of the corporation.
(Acts 1984, No. 84-290, p. 502, §19; §10-3A-34; amended and renumbered by Act 2009-513, p. 967, §171.)
(a) The number of directors of a nonprofit corporation shall be not less than one. Subject to this limitation, unless the number of directors is fixed by the certificate of formation or the bylaws, the board of directors may fix the number of directors from time to time. The number of directors to serve on the initial board of directors shall be fixed by the certificate of formation. Unless the certificate of formation or bylaws require an amendment to the certificate or the bylaws, the number of directors may be increased or decreased from time to time by the board of directors. No decrease in number shall have the effect of shortening the term of any incumbent director.
(b) The directors constituting the initial board of directors shall be named in the certificate of formation and shall hold office until the first annual election of directors or for any other period as may be specified in the governing documents. Thereafter, directors shall be elected or appointed in the manner and for the terms provided in the governing documents of the nonprofit corporation. In the absence of a provision fixing the term of office, the term of office of a director shall be one year.
(c) Directors may be divided into classes and the terms of office of the several classes need not be uniform. Each director shall hold office for the term to which he or she is elected or appointed and until his or her successor shall have been elected or appointed and qualified.
(d) A director may be removed from office pursuant to any procedure therefor provided in the certificate of formation.
(Acts 1984, No. 84-290, p. 502, §20; §10-3A-35; amended and renumbered by Act 2009-513, p. 967, §171; Act 2021-299, §5.)
(a) Any vacancy occurring in the board of directors and any directorship to be filled by reason of an increase in the number of directors may be filled by the affirmative vote of a majority of the remaining directors, though less than a quorum of the board of directors, unless the governing documents of the nonprofit corporation provide that a vacancy or directorship so created shall be filled in some other manner, in which case the provision shall control.
(b) A director elected or appointed, as the case may be, to fill a vacancy shall be elected or appointed for the unexpired term of his or her predecessor in office.
(c) Any directorship to be filled by reason of an increase in the number of directors may be filled by the board of directors for a term of office continuing only until the next election of directors.
(Acts 1984, No. 84-290, p. 502, §21; §10-3A-36; amended and renumbered by Act 2009-513, p. 967, §171.)
(a) A majority of the number of directors fixed by the bylaws, or in the absence of a bylaw fixing the number of directors, then of the number stated in the certificate of formation, shall constitute a quorum for the transaction of business, unless otherwise provided in the governing documents of the nonprofit corporation; but in no event shall a quorum consist of less than one-third of the number of directors so fixed or stated. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by this title or this chapter or by the nonprofit corporation’s governing documents.
(b) If a quorum is present when the meeting is convened, the directors present may continue to do business, taking action by a vote of a majority of a quorum as fixed above, until adjournment, notwithstanding the withdrawal of enough directors to leave less than a quorum as fixed above, or the refusal of any director present to vote.
(Acts 1984, No. 84-290, p. 502, §22; §10-3A-37; amended and renumbered by Act 2009-513, p. 967, §171.)
If the governing documents of a nonprofit corporation so provide, the board of directors, by resolution adopted by a majority of the directors in office, may designate and appoint one or more committees each of which shall consist of two or more directors, which committees, to the extent provided in the resolution, or in the governing documents of the nonprofit corporation, shall have and exercise all the authority of the board of directors, except that no committee shall have the authority of the board of directors in reference to amending, altering, or repealing the bylaws; electing, appointing, or removing any member of any committee or any director or officer of the corporation; amending the certificate of formation, restating the certificate of formation, adopting a plan of merger or adopting a plan of consolidation with another nonprofit corporation or other entity authorizing the conversion of the nonprofit corporation into another form of entity; authorizing the sale, lease, exchange, or mortgage of all or substantially all of the property and assets of the corporation; authorizing the voluntary dissolution of the corporation or revoking proceedings therefor; adopting a plan for the distribution of the assets of the nonprofit corporation; or amending, altering, or repealing any action or resolution of the board of directors which by its terms provides that it shall not be amended, altered, or repealed by the committee. Other committees not having and exercising the authority of the board of directors in the management of the nonprofit corporation may be designated by a resolution adopted by a majority of the directors present at a meeting at which a quorum is present. The designation and appointment of any committee and the delegation thereto of authority shall not operate to relieve the board of directors, or any individual director of any responsibility imposed upon it or him or her by law.
(Acts 1984, No. 84-290, p. 502, §23; §10-3A-38; amended and renumbered by Act 2009-513, p. 967, §171.)
(a) Meetings of the board of directors, regular or special, may be held either within or without Alabama.
(b) Regular meetings of the board of directors or any committee designated thereby may be held with or without notice as prescribed in the bylaws. Special meetings of the board of directors or any committee designated thereby shall be held upon the notice prescribed in the bylaws. Attendance of a director at a meeting shall constitute a waiver of notice of the meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors or any committee designated thereby need be specified in the notice of the meeting or the waiver of notice unless required by the bylaws.
(c) Except as may be otherwise restricted by the nonprofit corporation’s governing documents, members of the board of directors or any committee designated thereby may participate in a meeting of the board or committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at that same time and participation by the means shall constitute presence in person at a meeting.
(Acts 1984, No. 84-290, p. 502, §24; §10-3A-39; amended and renumbered by Act 2009-513, p. 967, §171.)
Any action required by this title or this chapter to be taken at a meeting of the members or directors of a nonprofit corporation or any action which may be taken at a meeting of the members or directors or of a committee of directors may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all of the members entitled to vote with respect to the subject matter thereof, all of the directors or all of the members of the committee of directors, as the case may be. The consent shall have the same force and effect as a unanimous vote and may be stated as such in any filing instrument filed with the Secretary of State.
(Acts 1984, No. 84-290, p. 502, §25; §10-3A-40; amended and renumbered by Act 2009-513, p. 967, §171; Act 2020-73, §10.)
(a) The officers of a nonprofit corporation shall consist of a president, one or more vice presidents, a secretary, a treasurer, and other officers and assistant officers as may be deemed necessary, each of whom shall be elected or appointed at such time, in the manner and for the terms as may be prescribed in the nonprofit corporation’s governing documents. In the absence of any provision, all officers shall be elected or appointed annually by the board of directors. Each officer shall hold office for the term to which he or she is elected or appointed and until his or her successor shall have been elected or appointed. If the bylaws so provide, any two or more offices may be held by the same person.
(b) The governing documents of the nonprofit corporation may provide that any one or more officers of the corporation shall be ex officio members of the board of directors.
(c) The officers of a corporation may be designated by additional titles as may be provided in the governing documents of the nonprofit corporation.
(d) The officers and employees of the nonprofit corporation shall not be liable for obligations of the corporation.
(Acts 1984, No. 84-290, p. 502, §26; §10-3A-41; amended and renumbered by Act 2009-513, p. 967, §173; Act 2021-299, §5.)
Any officer elected or appointed may be removed by the persons authorized to elect or appoint the officer whenever in their judgment the best interests of the nonprofit corporation will be served thereby. The removal of an officer shall be without prejudice to the contract rights, if any, of the officer so removed. Election or appointment of an officer shall not of itself create contract rights.
(Acts 1984, No. 84-290, p. 502, §27; §10-3A-42; amended and renumbered by Act 2009-513, p. 967, §173.)
The initial bylaws of a nonprofit corporation shall be adopted by its board of directors. The power to alter, amend or repeal the bylaws or adopt new bylaws shall be vested in the board of directors, unless otherwise provided in the governing documents of the nonprofit corporation. The bylaws may contain any provisions for the regulation and management of the affairs of a corporation not inconsistent with law or the certificate of formation.
(Acts 1984, No. 84-290, p. 502, §12; §10-3A-27; amended and renumbered by Act 2009-513, p. 967, §175.)
Each nonprofit corporation shall keep correct and complete books and records of account and shall keep minutes of the proceedings of its members, board of directors and committees having any of the authority of the board of directors; and shall keep at its registered office or principal office in Alabama a record of the names and addresses of its members entitled to vote, directors and officers. All books and records of a nonprofit corporation may be inspected by any member, director or officer, or his or her agent or attorney, for any proper purpose at any reasonable time.
(Acts 1984, No. 84-290, p. 502, §28; §10-3A-43; amended and renumbered by Act 2009-513, p. 967, §175.)
A nonprofit corporation shall not have or issue shares of stock. No dividend shall be paid and no part of the income or profit of a nonprofit corporation shall be distributed to its members, directors or officers. A nonprofit corporation may pay compensation in a reasonable amount to its members, directors, or officers for services rendered, may confer benefits upon its members in conformity with its purposes, and upon dissolution or final liquidation may make distributions to its members as permitted by this chapter, and no payment, benefit, or distribution shall be deemed to be a dividend or a distribution of income or profit.
(Acts 1984, No. 84-290, p. 502, §29; §10-3A-44; amended and renumbered by Act 2009-513, p. 967, §177.)
No loans shall be made by a nonprofit corporation to its directors or officers. Any director or officer who assents to or participates in the making of any loan shall be liable to the nonprofit corporation for the amount of the loan until the repayment thereof.
(Acts 1984, No. 84-290, p. 502, §30; §10-3A-45; amended and renumbered by Act 2009-513, p. 967, §176.)
Each nonprofit corporation shall have the power to indemnify any director or officer or former director or officer of the corporation, or any person who may have served at its request as a director or officer of another corporation, whether profit or nonprofit, in which it owns shares of capital stock or of which it is a creditor, against expenses actually and reasonably incurred by him or her in connection with the defense of any action, suit, or proceeding, civil or criminal, in which he or she is made a party by reason of being or having been such director or officer, except in relation to matters as to which he or she shall be adjudged in the action, suit, or proceeding to be liable for negligence or misconduct in the performance of his or her duty; and to make any other indemnification that shall be authorized by the governing documents of the nonprofit corporation, vote of the board of directors, or resolution adopted after notice by the members entitled to vote.
(Act 2009-513, p. 967, §178 )
No act of a nonprofit corporation and no conveyance or transfer of real or personal property to or by a nonprofit corporation shall be invalid by reason of the fact that the corporation was without capacity of power to do an act or to make or receive a conveyance or transfer, but lack of capacity of power may be asserted:
(1) In a proceeding by a member or a director against the nonprofit corporation to enjoin the doing or continuation of unauthorized acts, or the transfer of real or personal property by or to the nonprofit corporation. If the unauthorized acts or transfer sought to be enjoined are being, or are to be, performed pursuant to any contract to which the nonprofit corporation is a party, the court may, if all of the parties to the contract are parties to the proceeding and if it deems the same to be equitable, set aside and enjoin the performance of the contract, and in so doing may allow to the nonprofit corporation or the other parties to the contract, as the case may be, compensation for the loss or damage sustained by either of them which may result from the action of the court in setting aside and enjoining the performance of the contract, but anticipated profits to be derived from the performance of the contract shall not be awarded by the court as a loss or damage sustained.
(2) In a proceeding by the nonprofit corporation, whether acting directly or through a receiver, trustee, or other legal representative, or through members in a representative suit, against the officers or directors of the nonprofit corporation for exceeding their authority.
(3) In a proceeding by the Attorney General, as provided in this chapter, to dissolve the nonprofit corporation, or in a proceeding by the Attorney General to enjoin the nonprofit corporation from performing unauthorized acts, or in any other proceeding by the Attorney General.
(Acts 1984, No. 84-290, p. 502, §6; §10-3A-21; amended and renumbered by Act 2009-513, p. 967, §179.)
One or more persons, partnerships, domestic corporations or foreign corporations, whether profit or nonprofit, may act as incorporator or incorporators of a nonprofit corporation by signing the certificate of formation and delivering the same to the Secretary of State for filing.
(Acts 1984, No. 84-290, p. 502, §31; §10-3A-60; amended and renumbered by Act 2009-513, p. 967, §181; Act 2020-73, §10.)
(a) In addition to the information required by Section 10A-1-3.05 in a certificate of formation of a filing entity under this title, the certificate of formation of a nonprofit corporation formed under this chapter shall set forth:
(1) If the nonprofit corporation is to have no members, a statement to that effect.
(2) Any provisions, not inconsistent with law, which the incorporators elect to set forth in the certificate of formation for the regulation of the internal affairs of the nonprofit corporation, including any provision for distribution of assets on dissolution or final liquidation.
(3) The number of directors constituting the initial board of directors, and the names and addresses of the persons who are to serve as the initial directors.
(b) It shall not be necessary to set forth in the certificate of formation any of the entity powers enumerated in Section 10A-1-2.11 or set forth in this chapter.
(c) Unless the certificate of formation provides that a change in the number of directors shall be made only by amendment to the certificate of formation, a change in the number of directors made by amendment to the bylaws shall be controlling. In all other cases, whenever a provision of the certificate of formation is inconsistent with a bylaw, the provision of the certificate of formation shall be controlling.
(Acts 1984, No. 84-290, p. 502, §32; §10-3A-61; amended and renumbered by Act 2009-513, p. 967, §181.)
Upon the effectiveness under Sections 10A-1-4.11 and 10A-1-4.12 of the filing of the certificate of formation with the Secretary of State, the corporate existence shall begin. The Secretary of State’s filing of the certificate of formation shall be conclusive evidence that the corporation has been incorporated under this chapter, except as against the State of Alabama in a proceeding to cancel or revoke the incorporation or for involuntary dissolution of the corporation.
(Acts 1984, No. 84-290, p. 502, §34; §10-3A-63; amended and renumbered by Act 2009-513, p. 967, §183; Act 2020-73, §10.)
(a) After the filing of the certificate of formation, an organizational meeting of the board of directors named in the certificate of formation shall be held, either within or without Alabama, at the call of a majority of the directors for the purpose of adopting bylaws, electing officers and transacting other business as may come before the meeting. The directors calling the meeting shall give at least three days’ notice thereof by mail to each director so named, which notice shall state the time and place of the meeting.
(b) A first meeting of the members may be held at the call of the directors, or a majority of them, upon at least three days’ notice, for the purposes as shall be stated in the notice of the meeting.
(Acts 1984, No. 84-290, p. 502, §35; §10-3A-64; amended and renumbered by Act 2009-513, p. 967, §183.)
(a) Amendments to the certificate of formation of a nonprofit corporation shall be made in the following manner:
(1) If there are members entitled to vote thereon, the board of directors shall adopt a resolution setting forth the proposed amendment and directing that it be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice setting forth the proposed amendment or a summary of the changes to be effected thereby shall be given to each member entitled to vote at the meeting within the time and in the manner provided in this chapter for the giving of notice of meetings of members. The proposed amendment shall be adopted upon receiving at least two-thirds of the votes entitled to be cast by members present or represented by proxy at the meeting.
(2) If there are no members, or no members entitled to vote thereon, or if the amendment is one that does not require member action under Section 10A-1-3.12(a), an amendment shall be adopted at a meeting of the board of directors upon receiving the vote of a majority of the directors in office.
(b) Any number of amendments may be submitted and voted upon at any one meeting.
(Acts 1984, No. 84-290, p. 502, §37; §10-3A-81; amended and renumbered by Act 2009-513, p. 967, §185.)
The certificate of amendment of a nonprofit corporation shall be executed for the nonprofit corporation by its president or a vice president, and by its secretary or an assistant secretary, and verified by one of the officers signing the articles. The certificate of amendment shall be delivered to the Secretary of State for filing. The certificate of amendment shall set forth the information required by Section 10A-1-3.13 for certificates of amendment, and in addition shall set forth:
(1) If there are members entitled to vote thereon, (i) a statement setting forth the date of the meeting of members at which the amendment was adopted, that a quorum was present at the meeting, and that the amendment received at least two-thirds of the votes entitled to be cast by members present or represented by proxy at the meeting, or (ii) a statement that the amendment was adopted by a consent in writing signed by all members entitled to vote with respect thereto.
(2) If there are no members, or no members entitled to vote thereon, a statement of the fact, the date of the meeting of the board of directors at which the amendment was adopted, and a statement of the fact that the amendment received the vote of a majority of the directors in office.
(Acts 1984, No. 84-290, p. 502, §38; §10-3A-82; amended and renumbered by Act 2009-513, p. 967, §185; Act 2020-73, §10.)
No amendment shall affect any existing cause of action in favor of or against a nonprofit corporation, or any pending suit to which a nonprofit corporation shall be a party, or the existing rights of persons other than members; and, in the event the corporate name shall be changed by amendment, no suit brought by or against a nonprofit corporation under its former name shall abate for that reason.
(Acts 1984, No. 84-290, p. 502, §39; §10-3A-83; amended and renumbered by Act 2009-513, p. 967, §185.)
(a) A domestic nonprofit corporation may at any time restate its certificate of formation as theretofore amended, in the following manner:
(1) If there are members entitled to vote thereon, the board of directors shall adopt a resolution setting forth the proposed restated certificate of formation and directing that they be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting.
(2) Written notice setting forth the proposed restated articles or a summary of the provisions thereof shall be given to each member entitled to vote thereon, within the time and in the manner provided in this chapter for the giving of notice of meetings of members. If the meeting is an annual meeting, the proposed restated articles or a summary of the provisions thereof may be included in the notice of the annual meeting.
(3) At the meeting a vote of the members entitled to vote thereon shall be taken on the proposed restated articles, which shall be adopted upon receiving the affirmative vote of a majority of the votes entitled to be cast by members present or represented by proxy at the meeting.
(4) If there are no members, or no members entitled to vote thereon, or if the only amendments to the original certificate of formation or to the most recent restated certificate of formation are amendments that do not require member action under Section 10A-1-3.12(a), the proposed restated articles shall be adopted at a meeting of the board of directors upon receiving the affirmative vote of a majority of the directors in office.
(b) Upon the approval, a restated certificate of formation shall be executed for the nonprofit corporation by its president or vice president, and by its secretary or assistant secretary, and verified by one of the officers signing the articles, and shall set forth:
(1) The information required by Section 10A-1-3.05, as supplemented by Section 10A-3-3.02.
(2) A statement that the restated certificate of formation shall state that they correctly set forth the provisions of the certificate of formation as theretofore amended, that they have been duly adopted as required by law, and that they supersede the original certificate of formation and all amendments thereto.
(c) The restated certificate of formation shall be delivered to the Secretary of State for filing.
(d) Upon the filing of the restated certificate of formation, the restated certificate of formation shall become effective and shall supersede the original certificate of formation and all amendments thereto.
(Acts 1984, No. 84-290, p. 502, §40; §10-3A-84; amended and renumbered by Act 2009-513, p. 967, §185; Act 2020-73, §10.)
(a) Any two or more domestic nonprofit corporations may merge into one of the corporations pursuant to a plan of merger approved in the manner provided in this chapter.
(b) Each nonprofit corporation shall adopt a plan of merger setting forth:
(1) The names of the nonprofit corporations proposing to merge, and the name of the nonprofit corporation into which they propose to merge, which is hereinafter designated as the surviving nonprofit corporation.
(2) The terms and conditions of the proposed merger.
(3) A statement of any changes in the certificate of formation of the surviving nonprofit corporation to be effected by the merger.
(4) The other provisions with respect to the proposed merger as are deemed necessary or desirable.
(Acts 1984, No. 84-290, p. 502, §41; §10-3A-100; amended and renumbered by Act 2009-513, p. 967, §187.)
(a) Any two or more domestic nonprofit corporations may consolidate into a new nonprofit corporation pursuant to a plan of consolidation approved in the manner provided in this chapter.
(b) Each nonprofit corporation shall adopt a plan of consolidation setting forth:
(1) The names of the nonprofit corporations proposing to consolidate, and the name of the new nonprofit corporation into which they propose to consolidate, which is hereinafter designated as the new nonprofit corporation.
(2) The terms and conditions of the proposed consolidation.
(3) With respect to the new nonprofit corporation, all of the statements required to be set forth in the certificate of formation for nonprofit corporations organized under this chapter.
(4) The other provisions with respect to the proposed consolidation as are deemed necessary or desirable.
(Acts 1984, No. 84-290, p. 502, §42; §10-3A-101; amended and renumbered by Act 2009-513, p. 967, §187.)
(a) A plan of merger or consolidation shall be adopted in the following manner:
(1) If the members of any merging or consolidating nonprofit corporation are entitled to vote thereon, the board of directors of the nonprofit corporation shall adopt a resolution approving the proposed plan and directing that it be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice setting forth the proposed plan or a summary thereof shall be given to each member entitled to vote at the meeting within the time and in the manner provided in this chapter for the giving of notice of meeting of members. The proposed plan shall be adopted upon receiving at least two-thirds of the votes entitled to be cast by members present or represented by proxy at the meeting.
(2) If any merging or consolidating nonprofit corporation has no members, or no members entitled to vote thereon, a plan of merger or consolidation shall be adopted at a meeting of the board of directors of the corporation upon receiving the vote of a majority of the directors in office.
(b) After the approval, and at any time prior to the filing of the articles of merger or consolidation, the merger or consolidation may be abandoned pursuant to provisions therefor, if any, set forth in the plan of merger or consolidation.
(Acts 1984, No. 84-290, p. 502, §43; §10-3A-102; amended and renumbered by Act 2009-513, p. 967, §187.)
(a) Upon the approval, articles of merger or articles of consolidation shall be executed for each nonprofit corporation by its president or a vice president, and by its secretary or an assistant secretary, and verified by one of the officers signing the articles, and shall set forth:
(1) The plan of merger or the plan of consolidation;
(2) If the members of any merging or consolidating nonprofit corporation are entitled to vote thereon, then as to each nonprofit corporation (i) a statement setting forth the date of the meeting of members at which the plan was adopted, that a quorum was present at the meeting, and that the plan received at least two-thirds of the votes entitled to be cast by members present or represented by proxy at the meeting, or (ii) a statement that the amendment was adopted by a consent in writing signed by all members entitled to vote with respect thereto; and
(3) If any merging or consolidating nonprofit corporation has no members, or no members entitled to vote thereon, then as to each nonprofit corporation a statement of the fact, the date of the meeting of the board of directors at which the plan was adopted, and a statement of the fact that the plan received the vote of a majority of the directors in office.
(b) The articles of merger or articles of consolidation shall be delivered to the Secretary of State for filing.
(Acts 1984, No. 84-290, p. 502, §44; §10-3A-103; amended and renumbered by Act 2009-513, p. 967, §187; Act 2020-73, §10.)
(a) The merger or consolidation shall be effected upon the effective date and time of the articles of merger or consolidation pursuant to Section 10A-1-4.11.
(b) When the merger or consolidation has been effected:
(1) The nonprofit corporations, parties to the plan of merger or consolidation, shall become a single nonprofit corporation, which, in the case of a merger, shall be that nonprofit corporation designated in the plan of merger as the surviving nonprofit corporation, and, in the case of a consolidation, shall be the new nonprofit corporation provided for in the plan of consolidation.
(2) The separate existence of all nonprofit corporations parties to the plan of merger or consolidation, except the surviving or new nonprofit corporation, shall cease.
(3) The surviving or new nonprofit corporation shall have all the rights, privileges, immunities, and powers and shall be subject to all the duties and liabilities of a nonprofit corporation organized under this title.
(4) The surviving or new nonprofit corporation shall thereupon and thereafter possess all the rights, privileges, immunities, and franchises of a public as well as of a private nature, of each of the merging or consolidating nonprofit corporations; and all property, real, personal and mixed, and all debts due on whatever account, and all other choses in action, and all and every other interest, of or belonging to or due to each of the nonprofit corporations so merged or consolidated, shall be taken and deemed to be transferred to and vested in the single nonprofit corporation without further act or deed; and the title to any real estate, or any interest therein, vested in any nonprofit corporations shall not revert or be in any way impaired by reason of the merger or consolidation.
(5) The surviving or new nonprofit corporation shall thenceforth be responsible and liable for all the liabilities and obligations of each of the nonprofit corporations so merged or consolidated; and any claim existing or action or proceeding pending by or against any of the nonprofit corporations may be prosecuted as if the merger or consolidation had not taken place, or the surviving or new nonprofit corporation may be substituted in its place. Neither the rights of creditors nor any liens upon the property of any nonprofit corporation shall be impaired by the merger or consolidation.
(6) In the case of a merger, the certificate of formation of the surviving nonprofit corporation shall be deemed to be amended to the extent, if any, that changes in its certificate of formation are stated in the plan of merger; and, in the case of a consolidation, the statements set forth in the articles of consolidation and which are required or permitted to be set forth in the certificate of formation of nonprofit corporations organized under this title shall be deemed to be the certificate of formation of the new nonprofit corporation.
(Acts 1984, No. 84-290, p. 502, §45; §10-3A-104; amended and renumbered by Act 2009-513, p. 967, §187.)
(a) One or more foreign nonprofit corporations and one or more domestic nonprofit corporations may be merged or consolidated in the following manner, if the merger or consolidation is permitted by the laws of the state under which each foreign nonprofit corporation is organized:
(1) Each domestic nonprofit corporation shall comply with the provisions of this title with respect to the merger or consolidation, as the case may be, of domestic nonprofit corporations and each foreign nonprofit corporation shall comply with the applicable provisions of the laws of the state under which it is organized.
(2) If the surviving or new nonprofit corporation, as the case may be, is to be governed by the laws of any state other than Alabama, it shall comply with the provisions of this title with respect to foreign entities if it is to conduct affairs in Alabama, and in every case it shall be deemed to have consented that it may be served with process in Alabama as provided by the statutes of Alabama or the rules of the Alabama Supreme Court in any proceeding for the enforcement of any obligation of any domestic nonprofit corporation which is a party to the merger or consolidation.
(b) The effect of the merger or consolidation shall be the same as in the case of the merger or consolidation of domestic nonprofit corporations, if the surviving or new nonprofit corporation is to be governed by the laws of Alabama. If the surviving or new nonprofit corporation is to be governed by the laws of any state other than Alabama, the effect of the merger or consolidation shall be the same as in the case of the merger or consolidation of domestic nonprofit corporations except insofar as the laws of the other state provide otherwise.
(c) After approval by the members or, if there be no members entitled to vote thereon, by the board of directors, and at any time prior to the filing of the articles of merger or consolidation, the merger or consolidation may be abandoned pursuant to provisions therefor, if any, set forth in the plan of merger or consolidation.
(Acts 1984, No. 84-290, p. 502, §46; §10-3A-105; amended and renumbered by Act 2009-513, p. 967, §187.)
The provisions of this chapter on merger and consolidation are not exclusive. Nonprofit corporations may be merged or consolidated, or converted, in any other manner provided by law, including as provided by Article 8 of Chapter 1.
(Act 2009-513, p. 967, §188.)
A sale, lease, exchange, mortgage, pledge or other disposition of all, or substantially all, the property and assets of a nonprofit corporation may be made upon the terms and conditions and for the consideration, which may consist in whole or in part of money or property, real or personal, including shares of any corporation for profit, domestic or foreign, as may be authorized in the following manner:
(1) If there are members entitled to vote thereon, the board of directors shall adopt a resolution recommending the sale, lease, exchange, mortgage, pledge or other disposition and directing that it be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice stating that the purpose, or one of the purposes, of the meeting is to consider the sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, the property and assets of the nonprofit corporation shall be given to each member entitled to vote at the meeting, within the time and in the manner provided by this chapter for the giving of notice of meetings of members. At the meeting the members may authorize the sale, lease, exchange, mortgage, pledge, or other disposition and may fix, or may authorize the board of directors to fix, any or all of the terms and conditions thereof and the consideration to be received by the nonprofit corporation therefor. The authorization shall require at least two-thirds of the votes entitled to be cast by members present or represented by proxy at the meeting. After the authorization by a vote of members, the board of directors, nevertheless, in its discretion, may abandon the sale, lease, exchange, mortgage, pledge, or other disposition of assets, subject to the rights of third parties under any contracts relating thereto, without further action or approval by members.
(2) If there are no members, or no members entitled to vote thereon, a sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, the property and assets of a nonprofit corporation shall be authorized upon receiving the vote of a majority of the directors in office.
(Acts 1984, No. 84-290, p. 502, §47; §10-3A-120; amended and renumbered by Act 2009-513, p. 967, §190.)
(a) A nonprofit corporation may dissolve and wind up its affairs in the following manner:
(1) If there are members entitled to vote thereon, the board of directors shall adopt a resolution recommending that the nonprofit corporation be dissolved, and directing that the question of the dissolution be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice stating that the purpose, or one of the purposes, of the meeting is to consider the advisability of dissolving the nonprofit corporation, shall be given to each member entitled to vote at the meeting, within the time and in the manner provided in this chapter for the giving of notice of meetings of members. A resolution to dissolve the nonprofit corporation shall be adopted upon receiving at least two-thirds of the votes entitled to be cast by members present or represented by proxy at the meeting.
(2) If there are no members, or no members entitled to vote thereon, the dissolution of the corporation shall be authorized at a meeting of the board of directors upon the adoption of a resolution to dissolve by the vote of a majority of the directors in office.
(b) Upon the adoption of the resolution by the members, or by the board of directors if there are no members or no members entitled to vote thereon, a statement of intent to dissolve shall be executed for the nonprofit corporation by its president or a vice president, and by its secretary or an assistant secretary, and verified by one of the officers signing the statement, which statement shall set forth:
(1) The name of the nonprofit corporation.
(2) The names and respective addresses of its officers.
(3) The names and respective addresses of its directors.
(4) If there are members entitled to vote thereon, (i) a statement setting forth the date of the meeting of members at which the resolution to dissolve was adopted, that a quorum was present at the meeting, and that the resolution received at least two-thirds of the votes entitled to be cast by members present or represented by proxy at the meeting, or (ii) a statement that the resolution was adopted by a consent in writing signed by all members entitled to vote with respect thereto.
(5) If there are no members, or no members entitled to vote thereon, a statement of the fact, the date of the meeting of the board of directors at which the resolution to dissolve was adopted, and a statement of the fact that the resolution received the vote of a majority of the directors in office.
(6) The unique identifying number or other designation as assigned by the Secretary of State.
(c) The statement of intent to dissolve shall be delivered to the Secretary of State for filing.
(d) Upon the filing of a statement of intent to dissolve, the nonprofit corporation shall cease to conduct its affairs except insofar as may be necessary for the winding up thereof, and shall proceed to collect its assets and apply and distribute them as provided in this chapter.
(Acts 1984, No. 84-290, p. 502, §48; §10-3A-140; amended and renumbered by Act 2009-513, p. 967, §192; Act 2020-73, §10.)
The assets of a nonprofit corporation in the process of dissolution shall be applied and distributed as follows:
(1) All liabilities and obligations of the nonprofit corporation shall be paid and discharged, or adequate provision shall be made therefor;
(2) Assets held by the nonprofit corporation upon condition requiring return, transfer or conveyance, which condition occurs by reason of the dissolution, shall be returned, transferred or conveyed in accordance with the requirements;
(3) Assets received and held by the nonprofit corporation subject to limitations permitting their use only for charitable, religious, eleemosynary, benevolent, educational, or similar purposes, but not held upon a condition requiring return, transfer or conveyance by reason of the dissolution, shall be transferred or conveyed to one or more domestic or foreign corporations, societies or organizations engaged in activities substantially similar to those of the dissolving nonprofit corporation, pursuant to a plan of distribution adopted as provided in this chapter;
(4) Other assets, if any, shall be distributed in accordance with the provisions of the governing documents to the extent that the governing documents determine the distributive rights of members, or any class or classes of members, or provide for distribution to others;
(5) Any remaining assets may be distributed to the persons, societies, organizations, or domestic or foreign corporations, whether for profit or nonprofit, as may be specified in a plan of distribution adopted as provided in this chapter.
(Acts 1984, No. 84-290, p. 502, §49; §10-3A-141; amended and renumbered by Act 2009-513, p. 967, §192.)
A plan providing for the distribution of assets, not inconsistent with the provisions of this chapter, may be adopted by a nonprofit corporation in the process of dissolution and shall be adopted by a nonprofit corporation for the purpose of authorizing any transfer or conveyance of assets for which this chapter requires a plan of distribution, in the following manner:
(1) If there are members entitled to vote thereon, the board of directors shall adopt a resolution recommending a plan of distribution and directing the submission thereof to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice setting forth the proposed plan of distribution or a summary thereof shall be given to each member entitled to vote at the meeting, within the time and in the manner provided in this chapter for the giving of notice of meetings of members. The plan of distribution shall be adopted upon receiving at least two-thirds of the votes entitled to be cast by members present or represented by proxy at the meeting.
(2) If there are no members, or no members entitled to vote thereon, a plan of distribution shall be adopted at a meeting of the board of directors upon receiving a vote of a majority of the directors in office.
(Acts 1984, No. 84-290, p. 502, §50; §10-3A-142; amended and renumbered by Act 2009-513, p. 967, §192.)
(a) A nonprofit corporation may, at any time prior to the delivery of the articles of dissolution to the Secretary of State for filing, revoke the action theretofore taken to dissolve the nonprofit corporation, in the following manner:
(1) If there are members entitled to vote thereon, the board of directors shall adopt a resolution recommending that the voluntary dissolution proceedings be revoked, and directing that the question of the revocation be submitted to a vote at a meeting of members entitled to vote thereon, which may be either an annual or a special meeting. Written notice stating that the purpose, or one of the purposes, of the meeting is to consider the advisability of revoking the voluntary dissolution proceedings shall be given to each member entitled to vote at the meeting, within the time and in the manner provided in this chapter for the giving of notice of meetings of members. A resolution to revoke the voluntary dissolution proceedings shall be adopted upon receiving at least two-thirds of the votes entitled to be cast by members present or represented by proxy at the meeting.
(2) If there are no members, or no members entitled to vote thereon, a resolution to revoke the voluntary dissolution proceedings shall be adopted at a meeting of the board of directors upon receiving the vote of a majority of the directors in office.
(b) Upon the adoption of the resolution by the members, or by the board of directors where there are no members or no members entitled to vote thereon, a statement of revocation of voluntary dissolution proceedings shall be executed for the nonprofit corporation by its president or a vice president, and by its secretary or an assistant secretary, and verified by one of the officers signing the statement, which statement shall set forth:
(1) The name of the nonprofit corporation.
(2) The names and respective addresses of its officers.
(3) The names and respective addresses of its directors.
(4) If there are members entitled to vote thereon, (i) a statement setting forth the date of the meeting of members at which the resolution to revoke the voluntary dissolution proceedings was adopted, that a quorum was present at the meeting, and that the resolution received at least two-thirds of the votes entitled to be cast by members present or represented by proxy at the meeting, or (ii) a statement that the resolution was adopted by a consent in writing signed by all members entitled to vote with respect thereto.
(5) If there are no members, or no members entitled to vote thereon, a statement of the fact, the date of the meeting of the board of directors at which the resolution to revoke the voluntary dissolution proceedings was adopted, and a statement of the fact that the resolution received the vote of a majority of the directors in office.
(6) The unique identifying number or other designation as assigned by the Secretary of State.
(c) The statement of revocation of voluntary dissolution proceedings shall be delivered to the Secretary of State for filing.
(d) Upon the filing of a statement of revocation of voluntary dissolution proceedings, the nonprofit corporation may thereupon again conduct its affairs.
(Acts 1984, No. 84-290, p. 502, §51; §10-3A-143; amended and renumbered by Act 2009-513, p. 967, §192; Act 2020-73, §10.)
If voluntary dissolution proceedings have not been revoked, then when all debts, liabilities, and obligations of the corporation shall have been paid and discharged, or adequate provision shall have been made therefor, and all of the remaining property and assets of the nonprofit corporation shall have been transferred, conveyed, or distributed in accordance with the provisions of this chapter, articles of dissolution shall be executed for the nonprofit corporation by its president or a vice president, and by its secretary or an assistant secretary, and verified by one of the officers signing the articles, which statement shall set forth:
(1) The name of the nonprofit corporation.
(2) That a statement of intent to dissolve the nonprofit corporation has theretofore been filed, and the date on which the statement was filed.
(3) That all debts, obligations, and liabilities of the nonprofit corporation have been paid and discharged or that adequate provision has been made therefor.
(4) A copy of the plan of distribution, if any, as adopted by the nonprofit corporation, or a statement that no plan was so adopted.
(5) That all the remaining property and assets of the nonprofit corporation have been transferred, conveyed, or distributed in accordance with the provisions of this chapter.
(6) That there are no suits pending against the nonprofit corporation in any court, or that adequate provision has been made for the satisfaction of any judgment, order, or decree which may be entered against it in any pending suit.
(7) The unique identifying number or other designation as assigned by the Secretary of State.
(Acts 1984, No. 84-290, p. 502, §52; §10-3A-144; amended and renumbered by Act 2009-513, p. 967, §192; Act 2020-73, §10.)
(a) The articles of dissolution shall be delivered to the Secretary of State for filing.
(b) Upon the filing of the articles of dissolution, the existence of the nonprofit corporation shall cease, except for the purpose of suits, other proceedings, and appropriate corporate action by members, directors, and officers as provided in this chapter or otherwise in this title.
(Acts 1984, No. 84-290, p. 502, §53; §10-3A-145; amended and renumbered by Act 2009-513, p. 967, §192; Act 2020-73, §10.)
A nonprofit corporation may be dissolved involuntarily by an order of the circuit court of the county in which the principal office of the nonprofit corporation in this state is located, and if none is located in this state, the circuit court for the county in which the most recent registered office of the nonprofit corporation is located in an action filed by the Attorney General when it is established that:
(1) The nonprofit corporation procured its certificate of formation through fraud;
(2) The nonprofit corporation has continued to exceed or abuse the authority conferred upon it by law;
(3) The nonprofit corporation has failed for 90 days to appoint and maintain a registered agent in Alabama; or
(4) The nonprofit corporation has failed for 90 days after change of its registered agent to file in the office of the Secretary of State a statement of the change.
(Acts 1984, No. 84-290, p. 502, §54; §10-3A-146; amended and renumbered by Act 2009-513, p. 967, §192; Act 2020-73, §10.)
The Secretary of State shall certify to the Attorney General, from time to time, the names of all nonprofit corporations which have given cause for dissolution as provided in this chapter, together with the facts pertinent thereto. Whenever the Secretary of State shall certify the name of a nonprofit corporation to the Attorney General as having given any cause for dissolution, the Secretary of State shall concurrently mail to the nonprofit corporation at its registered office a notice that the certification has been made. Upon the receipt of the certification, the Attorney General shall, no sooner than 30 days nor more than 90 days after the receipt, file an action in the name of the State of Alabama against the nonprofit corporation for its dissolution. If, before an action is filed, the nonprofit corporation shall appoint or maintain a registered agent as provided in this title, or shall file with the Secretary of State the required statement of change of registered agent, the fact shall be forthwith certified by the Secretary of State to the Attorney General and he or she shall not file an action against the nonprofit corporation for the cause. If, after an action is filed, the nonprofit corporation shall appoint or maintain a registered agent as provided in this title, or shall file with the Secretary of State the required statement of change of registered agent, and shall pay the costs of the action, the action for the cause shall abate.
(Acts 1984, No. 84-290, p. 502, §55; §10-3A-147; amended and renumbered by Act 2009-513, p. 967, §192; Act 2020-73, §10.)
Every action for the involuntary dissolution of a nonprofit corporation shall be commenced by the Attorney General in the circuit court for the county in which the nonprofit corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the nonprofit corporation’s most recent registered office is located. Summons shall issue and be served as in other civil actions. If process is returned not found, the Attorney General shall cause publication to be made as in other civil cases in some newspaper published in the county in which the nonprofit corporation’s principal office is located in this state, and if none in this state, in the county in which the nonprofit corporation’s most recent registered office is located, containing a notice of the pendency of the action, the title of the court, the title of the action, and the date on or after which default may be entered. The Attorney General may include in one notice the names of any number of nonprofit corporations against which actions are then pending in the same court. The Attorney General shall cause a copy of the notice to be mailed to the nonprofit corporation at its registered office within 10 days after the first publication thereof. The certificate of the Attorney General of the mailing of the notice shall be prima facie evidence thereof. The notice shall be published once each week for two successive weeks, and the first publication thereof may begin at any time after the summons has been returned. Unless a nonprofit corporation shall have been served with summons, no default shall be taken against it earlier than 30 days after the last publication of the notice.
(Acts 1984, No. 84-290, p. 502, §56; §10-3A-148; amended and renumbered by Act 2009-513, p. 967, §192; Act 2020-73, §10.)
(a) The circuit court of the county in which the nonprofit corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the nonprofit corporation’s most recent registered office is located shall have full power to liquidate the assets and affairs of a nonprofit corporation:
(1) In an action by a member or director when it is established:
a. That the directors are deadlocked in the management of the corporate affairs and that irreparable injury to the nonprofit corporation is being suffered or is threatened by reason thereof, and either that the members are unable to break the deadlock or there are no members having voting rights;
b. That the acts of the directors or those in control of the nonprofit corporation are illegal, oppressive, or fraudulent;
c. That the members entitled to vote in the election of directors are deadlocked in voting power and have failed for at least two years to elect successors to directors whose terms have expired or would have expired upon the election of their successors;
d. That the corporate assets are being misapplied or wasted; or
e. That the nonprofit corporation is unable to carry out its purposes.
(2) In an action by a creditor:
a. When the claim of the creditor has been reduced to judgment and an execution thereon has been returned unsatisfied and it is established that the nonprofit corporation is insolvent; or
b. When the nonprofit corporation has admitted in writing that the claim of the creditor is due and owing and it is established that the nonprofit corporation is insolvent.
(3) Upon application by a nonprofit corporation to have its dissolution continued under the supervision of the court.
(4) When an action has been filed by the Attorney General to dissolve a nonprofit corporation and it is established that liquidation of its affairs should precede the entry of an order of dissolution.
(b) Proceedings under this section shall be brought in the circuit court for the county in which the nonprofit corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the nonprofit corporation’s most recent registered office is located.
(c) It shall not be necessary to make directors or members parties to any action or proceedings unless relief is sought against them personally.
(Acts 1984, No. 84-290, p. 502, §57; §10-3A-149; amended and renumbered by Act 2009-513, p. 967, §192; Act 2020-73, §10.)
(a) In proceedings to liquidate the assets and affairs of a nonprofit corporation, the court shall have the power to issue restraining orders or injunctions, to appoint a receiver or receivers pendente lite, with the powers and duties as the court, from time to time, may direct, and to take other proceedings as may be requisite to preserve the corporate assets wherever situated, and carry on the affairs of the nonprofit corporation until a full hearing can be had.
(b) After a hearing had upon the notice as the court may direct to be given to all parties to the proceedings and to any other parties in interest designated by the court, the court may appoint a liquidating receiver or receivers with authority to collect the assets of the nonprofit corporation. The liquidating receiver or receivers shall have authority, subject to the order of the court, to sell, convey, and dispose of all or any part of the assets of the nonprofit corporation wherever situated, either at public or private sale. The order appointing the liquidating receiver or receivers shall state their powers and duties. The powers and duties may be increased or diminished at any time during the proceedings.
(c) The assets of the nonprofit corporation or the proceeds resulting from a sale, conveyance, or other disposition thereof shall be applied and distributed as follows:
(1) All costs and expenses of the court proceedings and all liabilities and obligations of the nonprofit corporation shall be paid, satisfied and discharged, or adequate provision shall be made therefor;
(2) Assets held by the nonprofit corporation upon condition requiring return, transfer or conveyance, which condition occurs by reason of the dissolution or liquidation, shall be returned, transferred, or conveyed in accordance with the requirements;
(3) Assets received and held by the nonprofit corporation subject to limitations permitting their use only for charitable, religious, eleemosynary, benevolent, educational, or similar purposes, but not held upon a condition requiring return, transfer, or conveyance by reason of the dissolution or liquidation, shall be transferred or conveyed to one or more domestic or foreign nonprofit corporations, societies, or organizations engaged in activities substantially similar to those of the dissolving or liquidating nonprofit corporation as the court may direct;
(4) Other assets, if any, shall be distributed in accordance with the provisions of the governing documents of the nonprofit corporation to the extent that the governing documents determine the distributive right of members, or any class or classes of members, or provide for distribution to others; and
(5) Any remaining assets may be distributed to the persons, societies, organizations or domestic or foreign corporations, whether for profit or nonprofit, specified in the plan of distribution adopted as provided in this chapter, or when no plan of distribution has been adopted, as the court may direct.
(d) The court shall have power to allow, from time to time, as expenses of the liquidation compensation to the receiver or receivers and to attorneys in the proceeding, and to direct the payment thereof out of the assets of the nonprofit corporation or the proceeds of any sale or disposition of the assets.
(e) A receiver of a nonprofit corporation appointed under the provisions of this section shall have authority to sue and defend in all courts in his or her own name as receiver of the corporation. The court appointing the receiver shall have exclusive jurisdiction of the nonprofit corporation and its property, wherever situated.
(Acts 1984, No. 84-290, p. 502, §58; §10-3A-150; amended and renumbered by Act 2009-513, p. 967, §192.)
A receiver shall be a natural person, a partnership, a professional association, a professional corporation, or a business corporation authorized to act as receiver, which corporation may be a domestic corporation or a foreign corporation authorized to transact business in Alabama, and shall in all cases give bond as the court may direct with the sureties the court may require.
(Acts 1984, No. 84-290, p. 502, §59; §10-3A-151; amended and renumbered by Act 2009-513, p. 967, §192.)
In proceedings to liquidate the assets and affairs of a nonprofit corporation, the court may require all creditors of the nonprofit corporation to file with the clerk of the court or with the receiver, in the form as the court may prescribe, proofs under oath of their respective claims. If the court requires the filing of claims, it shall fix a date, which shall be not less than four months from the date of the order, as the last day for the filing of claims, and shall prescribe the notice that shall be given to creditors and claimants of the date so fixed. Prior to the date so fixed, the court may extend the time for the filing of claims. Creditors and claimants failing to file proofs of claim on or before the date so fixed may be barred, by order of court, from participating in the distribution of the assets of the nonprofit corporation.
(Acts 1984, No. 84-290, p. 502, §60; §10-3A-152; amended and renumbered by Act 2009-513, p. 967, §192.)
The liquidation of the assets and affairs of a nonprofit corporation may be discontinued at anytime during the liquidation proceedings when it is established that cause for liquidation no longer exists. In that event, the court shall dismiss the proceedings and direct the receiver to redeliver to the nonprofit corporation all its remaining property and assets.
(Acts 1984, No. 84-290, p. 502, §61; §10-3A-153; amended and renumbered by Act 2009-513, p. 967, §192.)
In proceedings to liquidate the assets and affairs of a nonprofit corporation, when the costs and expenses of the proceedings and all debts, obligations, and liabilities of the nonprofit corporation shall have been paid and discharged and all of its remaining property and assets distributed in accordance with the provisions of this chapter, or in case its property and assets are not sufficient to satisfy and discharge the costs, expenses, debts, and obligations, and all the property and assets have been applied so far as they will go to their payment, the court shall enter an order dissolving the nonprofit corporation, whereupon the existence of the nonprofit corporation shall cease.
(Acts 1984, No. 84-290, p. 502, §62; §10-3A-154; amended and renumbered by Act 2009-513, p. 967, §192.)
In case the court shall enter an order dissolving a nonprofit corporation, it shall be the duty of the court to cause a certified copy of the order to be delivered to the Secretary of State for filing. No fee shall be charged by the Secretary of State for the filing thereof.
(Acts 1984, No. 84-290, p. 502, §63; §10-3A-155; amended and renumbered by Act 2009-513, p. 967, §192; Act 2020-73, §10.)
Upon the voluntary or involuntary dissolution of a nonprofit corporation, the portion of the assets distributable to any person who is unknown or cannot be found, or who is under disability and there is no person legally competent to receive the distributive portion, shall be reduced to cash and deposited with the State Treasurer and shall be paid over to the person or to his or her legal representative upon satisfactory proof to the State Treasurer of his or her right thereto. The cash shall be held for the owner by the State Treasurer for three years and any cash which remains unclaimed by the owner after three years shall be presumed abandoned and subject to the Uniform Disposition of Unclaimed Property Act.
(Acts 1984, No. 84-290, p. 502, §64; §10-3A-156; amended and renumbered by Act 2009-513, p. 967, §192.)
The dissolution of a nonprofit corporation either (1) by the filing of the articles of dissolution by the Secretary of State, or (2) by an order of court when the court has not liquidated the assets and affairs of the corporation as provided in this chapter, or (3) by operation of law, or (4) by expiration of its period of duration, shall not take away or impair any remedy available to or against the nonprofit corporation, its directors, officers, or members, for any right or claim existing, or any liability incurred, prior to the dissolution if action or other proceeding thereon is commenced within two years after the date of the dissolution. Any action or proceeding by or against the nonprofit corporation may be prosecuted or defended by the nonprofit corporation in its corporate name. The members, directors, and officers shall have power to take the corporate or other action as shall be appropriate to protect the remedy, right, or claim. If the nonprofit corporation was dissolved by the expiration of its period of duration, the nonprofit corporation may amend its certificate of formation at any time during the period of two years so as to extend its period of duration.
(Acts 1984, No. 84-290, p. 502, §65; §10-3A-157; amended and renumbered by Act 2009-513, p. 967, §192; Act 2020-73, §10.)
All persons who assume to act as a corporation without authority to do so shall be jointly and severally liable for all debts and liabilities incurred or arising as a result thereof.
(Acts 1984, No. 84-290, p. 502, §89; §10-3A-223; amended and renumbered by Act 2009-513, p. 967, §197.)
The repeal of a prior act by this title shall not impair, or otherwise affect, the organization or the continued existence of an existing nonprofit corporation, nor the right of any foreign nonprofit corporation presently qualified to conduct affairs in Alabama to continue to do so without again qualifying to conduct affairs in Alabama. Nor shall the repeal of a prior act by this title affect any right accrued or established, or any liability or penalty incurred, or the construction of the certificate of incorporation or charter of any nonprofit corporation organized before the enactment of this title, or the determination of the rights and interests of any of its members or creditors, under the provisions of the prior act before the repeal thereof.
(Acts 1984, No. 84-290, p. 502, §91; §10-3A-225; amended and renumbered by Act 2009-513, p. 967, §199.)
(a) This chapter and the provisions of Chapter 1 to the extent applicable to nonprofit corporations may be cited as the Alabama Nonprofit Corporation Law.
(b) The provisions of this chapter relating to nonprofit corporations shall apply to:
(1) All nonprofit corporations organized hereunder; and
(2) All nonprofit corporations heretofore organized under any act hereby or heretofore repealed, for a purpose or purposes for which a nonprofit corporation might be organized under this chapter.
(c) The provisions of this chapter relating to foreign nonprofit corporations shall apply to all foreign nonprofit corporations conducting affairs in Alabama for a purpose or purposes for which a nonprofit corporation might be organized under this chapter.
(d) Beginning May 1, 2004, the Young Men’s Christian Association (YMCA) of Mobile which was incorporated by Act 405 approved on February 18, 1895, shall be subject to this chapter. Prospectively from May 1, 2004, the YMCA of Mobile shall be entitled to all of the rights and privileges of a nonprofit corporation including, but not limited to, the right to amend its charter and bylaws as provided by this chapter.
(Act 2023-503, §1.)
As used in this chapter, unless otherwise specified or unless the context otherwise requires, the following terms have the following meanings:
(1) CERTIFICATE OF INCORPORATION means the certificate of incorporation described in Section 10A-3A-2.02, all amendments to the certificate of incorporation, and any other documents permitted or required to be delivered for filing by a nonprofit corporation with the Secretary of State under this chapter or Chapter 1 that modify, amend, supplement, restate, or replace the certificate of incorporation. After the filing of a filing instrument under this chapter or Chapter 1 that restates or amends and restates the certificate of incorporation in its entirety, the certificate of incorporation shall not include any prior documents, but the original date of incorporation shall remain unchanged. When used with respect to a nonprofit corporation incorporated and existing on December 31, 2023, under a predecessor law of this state, the term “certificate of incorporation” means articles of incorporation, charter, or similar incorporating document, and all amendments and restatements to the articles of incorporation, charter, or similar incorporating document. When used with respect to a foreign nonprofit corporation, a business corporation, or a foreign business corporation, the “certificate of incorporation” of that entity means the document of that entity that is equivalent to the certificate of incorporation of a corporation. The term “certificate of incorporation” as used in this chapter is synonymous to the term certificate of formation used in Chapter 1.
(2) BOARD or BOARD OF DIRECTORS means the group of individuals responsible for the management or direction, and oversight, of the activities and affairs of the nonprofit corporation, regardless of the name used to refer to the group or other persons authorized to perform the functions of the board of directors.
(3) BUSINESS CORPORATION, except in the phrase foreign business corporation, means an entity incorporated or existing under the Alabama Business Corporation Law.
(4) BYLAWS means the code or codes of rules (other than the certificate of incorporation) adopted for the regulation or management of the affairs of the nonprofit corporation, regardless of the name or names by which the rules are designated.
(5) DELIVER or DELIVERY means any method of delivery used in conventional commercial practice, including delivery by hand, mail, commercial delivery, and, if authorized in accordance with Section 10A-3A-1.03, by electronic transmission.
(6) DIRECTOR means an individual designated, elected, or appointed, by that or any other name or title, to act as a member of the board of directors, while the individual is holding that position.
(7) DISTRIBUTION means a direct or indirect transfer of cash or other property from a nonprofit corporation to a member, director, or officer of that nonprofit corporation in that person’s capacity as a member, director, or officer, but does not mean payments or benefits made in accordance with Section 10A-3A-6.41.
(8) DOCUMENT means a writing as defined in Chapter 1.
(9) EFFECTIVE DATE when referring to a document accepted for filing by the Secretary of State, means the time and date determined in accordance with Article 4 of Chapter 1.
(10) ELECTRONIC MAIL means an electronic transmission directed to a unique electronic mail address.
(11) ELECTRONIC MAIL ADDRESS means a destination, commonly expressed as a string of characters, consisting of a unique user name or mailbox (commonly referred to as the “local part” of the address) and a reference to an internet domain (commonly referred to as the “domain part” of the address), whether or not displayed, to which electronic mail can be sent or delivered.
(12) EMPLOYEE does not include an individual serving as an officer or director who is not otherwise employed by the nonprofit corporation.
(13) ENTITLED TO VOTE means entitled to vote on the matter under consideration pursuant to the certificate of incorporation or bylaws of the nonprofit corporation, or applicable provisions of this chapter or Chapter 1.
(14) ENTITY includes nonprofit corporation; foreign nonprofit corporation; business corporation; foreign business corporation; estate; trust; unincorporated entity; foreign unincorporated entity; and state, United States, and foreign government.
(15) EXPENSES means reasonable expenses of any kind that are incurred in connection with a matter.
(16) FOREIGN BUSINESS CORPORATION means a business corporation incorporated under a law other than the law of this state which would be a business corporation if incorporated under the law of this state.
(17) FOREIGN NONPROFIT CORPORATION means a nonprofit corporation incorporated under a law other than the law of this state which would be a nonprofit corporation if incorporated under the law of this state.
(18) FOREIGN UNINCORPORATED ENTITY means an unincorporated entity whose internal affairs are governed by the law of a jurisdiction other than this state.
(19) FUNDAMENTAL TRANSACTION means an amendment of the certificate of incorporation, an amendment to the bylaws, a merger, a conversion, a sale of all or substantially all of the assets, or the dissolution of a nonprofit corporation.
(20) GOVERNING STATUTE means the statute governing the internal affairs of a nonprofit corporation, foreign nonprofit corporation, business corporation, foreign business corporation, unincorporated entity, or foreign unincorporated entity.
(21) INCLUDES and INCLUDING denote a partial definition or a nonexclusive list.
(22) INTEREST means:
(a) a share;
(b) a membership or membership interests; or
(c) either or both of the following rights under the governing statute governing an organization other than a nonprofit corporation, foreign nonprofit corporation, business corporation, or foreign business corporation:
(i) the right to receive distributions from that organization either in the ordinary course or upon liquidation; or
(ii) the right to receive notice or vote on issues involving that organization’s internal affairs, other than as an agent, assignee, proxy, or person responsible for managing that organization’s business and affairs.
(23) INTEREST HOLDER means a person who holds of record an interest.
(24) KNOWLEDGE is determined as follows:
(a) A person knows a fact when the person:
(1) has actual knowledge of it; or
(2) is deemed to know it under law other than this chapter.
(b) A person has notice of a fact when the person:
(1) knows of it;
(2) receives notification of it in accordance with Section 10A-3A-1.03;
(3) has reason to know the fact from all of the facts known to the person at the time in question; or
(4) is deemed to have notice of the fact under subsection (d).
(c) A person notifies another of a fact by taking steps reasonably required to inform the other person in ordinary course in accordance with Section 10A-3A-1.03, whether or not the other person knows the fact.
(d) A person is deemed to have notice of a nonprofit corporation’s:
(1) matters included in the certificate of incorporation upon filing;
(2) dissolution, 90 days after a certificate of dissolution under Section 10A-3A-11.05 becomes effective;
(3) conversion or merger under Article 13 or Article 12, 90 days after a statement of conversion or statement of merger becomes effective;
(4) conversion or merger under Article 8 of Chapter 1, 90 days after a statement of conversion or statement of merger becomes effective; and
(5) revocation of dissolution and reinstatement, 90 days after certificate of revocation of dissolution and reinstatement under Section 10A-3A-11.06 becomes effective.
(e) A member’s knowledge, notice, or receipt of a notification of a fact relating to the nonprofit corporation is not knowledge, notice, or receipt of a notification of a fact by that nonprofit corporation solely by reason of the member’s capacity as a member.
(f) The date and time of the effectiveness of a notice delivered in accordance with Section 10A-3A-1.03, is determined by Section 10A-3A-1.03.
(25) MEANS denotes an exhaustive definition.
(26) MEMBER means a person in whose name a membership is registered on the records of the membership nonprofit corporation and who has the right to (i) select or vote for the election of directors or (ii) vote on any type of fundamental transaction.
(27) MEMBERSHIP or MEMBERSHIP INTERESTS means the rights and any obligations of a member in a membership nonprofit corporation or a foreign membership nonprofit corporation.
(28) MEMBERSHIP NONPROFIT CORPORATION means, except as provided in Section 10A-3A-14.01(c)(1), a nonprofit corporation whose certificate of incorporation provides that it will have members.
(29) NONMEMBERSHIP NONPROFIT CORPORATION means a nonprofit corporation whose certificate of incorporation provides that it will not have members.
(30) NONPROFIT CORPORATION, except in the phrase foreign nonprofit corporation, means a nonprofit corporation incorporated under or existing under this chapter.
(31) ORGANIZATIONAL DOCUMENTS means the public organic record and private organizational documents of a nonprofit corporation, foreign nonprofit corporation, business corporation, foreign business corporation, or other organization.
(32) PRINCIPAL OFFICE means the office (in or out of this state) where the principal executive offices of a nonprofit corporation or foreign nonprofit corporation are located.
(33) PRIVATE ORGANIZATIONAL DOCUMENTS means (i) the bylaws of a nonprofit corporation, foreign nonprofit corporation, business corporation, or foreign business corporation or (ii) the rules, regardless of whether in writing, that govern the internal affairs of an unincorporated entity or foreign unincorporated entity, are binding on all its interest holders, and are not part of its public organic record, if any. Where private organizational documents have been amended or restated, the term means the private organizational documents as last amended or restated.
(34) PROCEEDING includes any civil suit and criminal, administrative, and investigatory action.
(35) PUBLIC ORGANIC RECORD means (i) the certificate of incorporation of a nonprofit corporation, foreign nonprofit corporation, business corporation, or foreign business corporation, or (ii) the document, if any, the filing of which is required to create an unincorporated entity or foreign unincorporated entity, or which creates the unincorporated entity or foreign unincorporated entity and is required to be filed. Where a public organic record has been amended or restated, the term means the public organic record as last amended or restated.
(36) RECORD DATE means the date fixed for determining the identity of the nonprofit corporation’s members and their interests for purposes of this chapter. Unless another time is specified when the record date is fixed, the determination shall be made as of the close of business at the principal office of the nonprofit corporation on the date so fixed.
(37) SECRETARY means the corporate officer to whom the certificate of incorporation, bylaws, or board of directors has delegated responsibility under Section 10A-3A-8.40(c) to maintain the minutes of the meetings of the board of directors, committees, and the members, and for authenticating records of the nonprofit corporation.
(38) SHARES means the units into which the proprietary interests in a domestic or foreign business corporation are divided.
(39) TYPE OF ENTITY means a generic form of entity: (i) recognized at common law; or (ii) formed under a governing statute, regardless of whether some entities formed under that law are subject to provisions of that law that create different categories of the form of entity.
(40) UNINCORPORATED ENTITY means an organization or artificial legal person that either has a separate legal existence or has the power to acquire an estate in real property in its own name and that is not any of the following: a corporation, foreign corporation, nonprofit corporation, foreign nonprofit corporation, a series of a limited liability company or of another type of entity, an estate, a trust, a state, United States, or foreign government. The term includes a general partnership, limited liability company, limited partnership, business trust, joint stock association, and unincorporated nonprofit association.
(41) UNITED STATES includes a district, authority, bureau, commission, department, and any other agency of the United States.
(42) VOTE, VOTING, or CASTING A VOTE includes the giving of consent in writing without a meeting. The term does not include either recording the fact of abstention or failing to vote for a candidate or for approval or disapproval of a matter, whether or not the person entitled to vote characterizes that conduct as voting or casting a vote.
(43) VOTING GROUP means one or more classes of members that under the certificate of incorporation, bylaws, or this chapter are entitled to vote and be counted together collectively on a matter at a meeting of members. All members entitled by the certificate of incorporation, bylaws, or this chapter to vote generally on the matter are for that purpose a single voting group.
(44) VOTING POWER means the current power to vote in the election of directors, or to vote on approval of any type of fundamental transaction.
(Act 2023-503, §1; Act 2024-413, §1.)
(a) A notice under this chapter must be in writing unless oral notice is reasonable in the circumstances. Unless otherwise agreed between the sender and the recipient, words in a notice or other communication under this chapter must be in English.
(b) A notice or other communication may be given by any method of delivery, except that notice or other communication by electronic transmission must be in accordance with this section. If the methods of delivery are impracticable, a notice or other communication from the nonprofit corporation may be given by means of a broad non-exclusionary distribution to the public (which may include a newspaper of general circulation in the area where published; radio, television, or other form of public broadcast communication; or other methods of distribution that the nonprofit corporation has previously identified to its recipients).
(c) A notice or other communication to a nonprofit corporation or to a foreign nonprofit corporation registered to transact business in this state may be delivered to the registered agent of the nonprofit corporation or the foreign nonprofit corporation at that registered agent’s registered office or to the secretary at the principal office of the nonprofit corporation or the foreign nonprofit corporation.
(d) A notice or other communication from a nonprofit corporation to a member may be delivered by electronic mail to the electronic mail address for that member maintained pursuant to Section 10A-3A-4.01(d), unless that member has previously notified the nonprofit corporation in writing that the member objects to receiving notices and other communications by electronic mail. Any notice or other communication may be delivered to a member by another form of electronic transmission if consented to by that member or if authorized by subsection (j). Any notice or other communication from a nonprofit corporation to any other person may be delivered by electronic transmission if consented to by the recipient or if authorized by subsection (j). Any consent under this subsection or subsection (j) may be revoked with respect to future notices or communications by the person who consented by written notice to the person to whom the consent was delivered.
(e) A notice or other communication may no longer be delivered to an electronic mail address or other electronic transmission address pursuant to subsection (d) if (i) the nonprofit corporation receives notice from the information processing system into which the notice or other communication was entered that two consecutive notices or other communications given by electronic transmission have not been delivered to the electronic mail address or other electronic transmission address to which the notice or other communication was directed, and (ii) the notice of non-delivery becomes known to the secretary or an assistant secretary, or another person responsible for the giving of notices or other communications for the nonprofit corporation; provided, however, that the inadvertent failure to recognize the notice of non-delivery as a cessation of authority to provide a member with notice by electronic mail or other electronic transmission shall not invalidate any meeting or other action.
(f) Unless otherwise agreed between the sender and the recipient, a notice or other communication by electronic transmission is received when:
(1) it enters an information processing system directed to: (i) in the case of a member, the electronic mail address for the member maintained pursuant to Section 10A-3A-4.01(d) or other electronic transmission address at which the member has consented to receive notice or other communication by electronic transmission; or (ii) in the case of any other recipient, the electronic transmission address at which the recipient has consented to receive notice or other communication by electronic transmission; and
(2) it is in a form capable of being processed by that system.
(g) Receipt of an electronic acknowledgment from an information processing system described in subsection (f)(1) establishes that an electronic transmission was received but, by itself, does not establish that the content sent corresponds to the content received.
(h) An electronic transmission is received under this section even if no person is aware of its receipt.
(i) A notice or other communication, if in a comprehensible form or manner, is effective at the earliest of the following:
(1) if in a physical form, the earliest of when it is actually received, or when it is left at:
(i) a member’s address included in the record of members maintained pursuant to Section 10A-3A-4.01(d);
(ii) a director’s residence or usual place of business; or
(iii) the nonprofit corporation’s principal office;
(2) if mailed by United States mail postage prepaid and addressed to a member at the member’s address included in the record of members maintained pursuant to Section 10A-3A-4.01(d), upon deposit in the United States mail;
(3) if mailed by United States mail postage prepaid and addressed to a recipient other than a member, at the address of the recipient reflected in the books and records of the nonprofit corporation, the earliest of when it is actually received, or:
(i) if sent by registered or certified mail, return receipt requested, the date shown on the return receipt signed by or on behalf of the addressee; or
(ii) five days after it is deposited in the United States mail;
(4) if sent by a nationally recognized commercial carrier that issues a receipt or other confirmation of delivery, the earliest of when it is actually received or the date shown on the receipt or other confirmation of delivery issued by the commercial carrier;
(5) if an electronic transmission, when it is received as provided in subsection (f); and
(6) if oral, when communicated.
(j) A notice or other communication may be in the form of an electronic transmission that cannot be directly reproduced in paper form by the recipient through an automated process used in conventional commercial practice only if (i) the electronic transmission is otherwise retrievable in perceivable form and (ii) the sender and the recipient have consented in writing to the use of that form of electronic transmission.
(k) If this chapter prescribes requirements for notices or other communications in particular circumstances, those requirements govern. If the certificate of incorporation or bylaws prescribe requirements for notices or other communications, not inconsistent with this section or other provisions of this chapter, those requirements govern. The certificate of incorporation or bylaws may authorize or require delivery of notices of meetings of directors by electronic transmission.
(l) In the event that any provisions of this chapter are deemed to modify, limit, or supersede the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. §§ 7001 et seq., the provisions of this chapter shall control to the maximum extent permitted by Section 102(a)(2) of that federal act.
(m) Whenever a notice or communication would otherwise be required to be given under any provision of this chapter to a member, the notice or communication need not be given if the nonprofit corporation is not permitted to deliver the notice or communication by electronic transmission pursuant to subsections (d) and (e) and:
(1) notices and communications to members of two consecutive annual meetings, and all notices and communications of meetings during the period between those two consecutive annual meetings, have been sent to that member at that member’s address included in the record of members maintained pursuant to Section 10A-3A-4.01(d) and have been returned undeliverable or could not be delivered; or
(2) no address has been provided to the nonprofit corporation by or on behalf of a member and the nonprofit corporation has not otherwise obtained an address for that member it believes to be reliable.
In addition if any member to which this subsection (m) applies delivers to the nonprofit corporation a written notice or communication setting forth that member’s then-current address, the requirement that notice and communication be given to that member shall be reinstated.
(n) Whenever a notice or communication is required to be given, under any provision of this chapter or of the certificate of incorporation or bylaws of any nonprofit corporation, to any person with whom notice to or communication with is unlawful, the giving of the notice or communication to that person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give the notice or communication to that person. Any action or meeting which shall be taken or held without notice or communication to the person with whom notice to or communication with is unlawful shall have the same force and effect as if the notice or communication had been duly given. In the event that the action taken by the nonprofit corporation requires the filing of a certificate or other filing instrument under any of the other sections of this chapter, the certificate or other filing instrument shall state, if that is the fact and if notice or communication is required, that notice or communication was given to all persons entitled to receive notice or communication except those persons with whom notice to or communication with is unlawful.
(Act 2023-503, §1.)
(a) Whenever any filing instrument is to be delivered to the Secretary of State for filing in accordance with this chapter, the instrument shall be executed as follows:
(1) Except as provided in subsection (a)(3), the certificate of incorporation, and any other instrument to be filed before the election of the initial board of directors if the initial directors were not named in the certificate of incorporation, shall be signed by the incorporator or incorporators or the successors and assigns of the incorporator or incorporators. If any incorporator is not available then any other instrument may be signed, with the same effect as if the incorporator had signed it, by any person for whom or on whose behalf the incorporator, in executing the certificate of incorporation, was acting directly or indirectly as employee or agent, provided that the other instrument shall state that the incorporator is not available and the reason therefor, that the incorporator in executing the certificate of incorporation was acting directly or indirectly as employee or agent for or on behalf of the person, and that the person’s signature on the instrument is otherwise authorized and not wrongful.
(2) Except as provided in subsection (a)(3), all other filing instruments shall be signed:
(i) by any authorized officer of the nonprofit corporation; or
(ii) if it shall appear from the filing instrument that there are no authorized officers, then by a majority of the directors or by the directors as may be designated by a majority of the board of directors; or
(iii) if it shall appear from the filing instrument that there are no authorized officers or directors, then by a majority of the members or by the members as may be designated by a majority of the members.
(3) If the nonprofit corporation is in the hands of a receiver, trustee, or other court-appointed fiduciary, by that fiduciary.
(b) The person executing the filing instrument shall sign it and state beneath or opposite the person’s signature the person’s name and the capacity in which the filing instrument is signed. The filing instrument may, but need not, contain a corporate seal, attestation, acknowledgment, or verification.
(c) Whenever a provision of this chapter permits any of the terms of a plan or a filing instrument to be dependent on facts objectively ascertainable outside the plan or filing instrument, the following provisions apply:
(1) The manner in which the facts will operate upon the terms of the plan or filing instrument must be set forth in the plan or filing instrument.
(2) The facts may include:
(i) any of the following that are available in a nationally recognized news or information medium either in print or electronically: statistical or market indices, market prices of any security or group of securities, interest rates, currency exchange rates, or similar economic or financial data;
(ii) a determination or action by any person or body, including the nonprofit corporation or any other party to a plan or filing instrument; or
(iii) the terms of, or actions taken under, an agreement to which the nonprofit corporation is a party, or any other agreement or document.
(3) As used in this subsection (c), “plan” means a plan of conversion or merger.
(4) The following provisions of a plan or filing instrument may not be made dependent on facts outside the plan or filed document:
(i) the name and address of any person required in a filing instrument;
(ii) the registered office of any entity required in a filing instrument;
(iii) the registered agent of any entity required in a filing instrument;
(iv) the effective date and time of a filing instrument as determined under Article 4 of Chapter 1; and
(v) any required statement in a filing instrument of the date on which the underlying transaction was approved or the manner in which that approval was given.
(5) If a provision of a filing instrument is made dependent on a fact ascertainable outside of the filing instrument, and that fact is neither ascertainable by reference to a source described in subsection (c)(2)(i) or a document that is a matter of public record, nor have the affected members, if any, and if none, the affected directors, received notice of the fact from the nonprofit corporation, then the nonprofit corporation shall deliver to the Secretary of State for filing a certificate of amendment to the filing instrument setting forth the fact promptly after the time when the fact referred to is first ascertainable or thereafter changes. A certificate of amendment under this subsection is deemed to be authorized by the authorization of the original filing instrument to which it relates and may be filed by the nonprofit corporation without further action by the board of directors or the members.
(Act 2023-503, §1.)
(a) The Secretary of State, upon request and payment of the requisite fee, shall furnish to any person a certificate of existence for a nonprofit corporation if the writings filed in the office of the Secretary of State show that the nonprofit corporation has been incorporated under the laws of this state. A certificate of existence shall reflect only the information on file with the Secretary of State. A certificate of existence must state:
(1) the nonprofit corporation’s name;
(2) that the nonprofit corporation was incorporated under the laws of this state, the date of incorporation, and the filing office in which the certificate of incorporation was filed;
(3) whether the nonprofit corporation has delivered to the Secretary of State for filing a certificate of dissolution;
(4) whether the nonprofit corporation has delivered to the Secretary of State for filing a certificate of reinstatement; and
(5) other facts of record in the office of the Secretary of State that are specified by the person requesting the certificate.
(b) The Secretary of State, upon request and payment of the requisite fee, shall furnish to any person a certificate of registration for a foreign nonprofit corporation if the writings filed in the office of the Secretary of State show that the Secretary of State has filed an application for registration for authority to transact business in this state and the registration has not been revoked, withdrawn, or terminated. A certificate of registration must state:
(1) the foreign nonprofit corporation’s name and any alternate name adopted for use in this state;
(2) that the foreign nonprofit corporation is authorized to transact business in this state;
(3) that the Secretary of State has not revoked the foreign nonprofit corporation’s registration;
(4) that the foreign nonprofit corporation has not filed with the Secretary of State a certificate of withdrawal or otherwise terminated its registration; and
(5) other facts of record in the office of the Secretary of State that are specified by the person requesting the certificate.
(c) Subject to any qualification stated in the certificate, a certificate of existence or certificate of registration issued by the Secretary of State is conclusive evidence that the nonprofit corporation is in existence or the foreign nonprofit corporation is authorized to transact business in this state.
(Act 2023-503, §1.)
In this Division:
(1) “CORPORATE ACTION” means any action taken by or on behalf of the nonprofit corporation, including any action taken by the incorporator, the board of directors, a committee of the board of directors, an officer or agent of the nonprofit corporation, or the members, if any.
(2) “DATE OF THE DEFECTIVE CORPORATE ACTION” means the date (or the approximate date, if the exact date is unknown) the defective corporate action was purported to have been taken.
(3) “DEFECTIVE CORPORATE ACTION” means (i) any corporate action purportedly taken that is, and at the time that corporate action was purportedly taken would have been, within the power of the nonprofit corporation, but is void or voidable due to a failure of authorization, and (ii) an overissue.
(4) “FAILURE OF AUTHORIZATION” means the failure to authorize, approve, or otherwise effect a corporate action in compliance with the provisions of this chapter, the certificate of incorporation or bylaws, a corporate resolution, or any plan or agreement to which the nonprofit corporation is a party, if and to the extent that failure would render that corporate action void or voidable.
(5) “OVERISSUE” means the purported issuance of:
(i) membership interests of a class in excess of the number, if any, of membership interests of a class the nonprofit corporation has the power to issue under its certificate of incorporation or bylaws at the time of issuance; or
(ii) membership interests of any class that is not then authorized for issuance by the certificate of incorporation or bylaws.
(6) “PUTATITVE MEMBERSHIP INTEREST” means a membership interest of any class (including a membership interest issued upon exercise of rights, options, warrants, or other securities convertible into a membership interest of the nonprofit corporation, or interests with respect to that membership interest) that was created or issued as a result of a defective corporate action, that (i) but for any failure of authorization would constitute a valid membership interest, or (ii) cannot be determined by the board of directors to be a valid membership interest.
(7) “VALID MEMBERSHIP INTEREST” means the membership interest of any class that has been duly authorized and validly issued in accordance with this chapter, including as a result of ratification or validation under this article.
(8) “VALIDATION EFFECTIVE TIME” with respect to any defective corporate action ratified under this article means the later of:
(i) the time at which the ratification of the defective corporate action is approved by the members, if any, and if none, by the board of directors; and
(ii) the time at which any certificate of validation filed in accordance with Section 10A-3A-1.26 becomes effective.
The validation effective time shall not be affected by the filing or pendency of a judicial proceeding under Section 10A-3A-1.27 or otherwise, unless otherwise ordered by the court.
(Act 2023-503, §1.)
(a) A defective corporate action shall not be void or voidable if ratified in accordance with Section 10A-3A-1.22 or validated in accordance with Section 10A-3A-1.27.
(b) Ratification under Section 10A-3A-1.22 or validation under Section 10A-2A-1.27 shall not be deemed to be the exclusive means of ratifying or validating any defective corporate action, and the absence or failure of ratification in accordance with this Division shall not, of itself, affect the validity or effectiveness of any corporate action properly ratified under common law or otherwise, nor shall it create a presumption that any such corporate action is or was a defective corporate action or void or voidable.
(c) In the case of an overissue, a putative membership interest shall be valid a membership interest effective as of the date originally issued or purportedly issued upon:
(1) the effectiveness under this article and under Article 9 of an amendment to the certificate of incorporation or bylaws authorizing, designating, or creating that membership interest; or
(2) the effectiveness of any other corporate action under this article ratifying the authorization, designation, or creation of a membership interest.
(Act 2023-503, §1.)
(a) To ratify a defective corporate action under this section (other than the ratification of an election of the initial board of directors under subsection (b)), the board of directors shall take action ratifying the action in accordance with Section 10A-3A-1.23, stating:
(1) the defective corporate action to be ratified and, if the defective corporate action involved the issuance of a putative membership interest, the number and types of putative membership interests purportedly issued;
(2) the date of the defective corporate action;
(3) the nature of the failure of authorization with respect to the defective corporate action to be ratified; and
(4) that the board of directors approves the ratification of the defective corporate action.
(b) In the event that a defective corporate action to be ratified relates to the election of the initial board of directors of the nonprofit corporation under Section 10A-3A-2.04(a)(2), a majority of the persons who, at the time of the ratification, are exercising the powers of directors may take an action stating:
(1) the name of the person or persons who first took action in the name of the nonprofit corporation as the initial board of directors of the nonprofit corporation;
(2) the earlier of the date on which those persons first took the action or were purported to have been elected as the initial board of directors; and
(3) that the ratification of the election of the person or persons as the initial board of directors is approved.
(c) If any provision of this chapter, the certificate of incorporation or bylaws, any corporate resolution, or any plan or agreement to which a membership nonprofit corporation is a party in effect at the time action under subsection (a) is taken requires member approval or would have required member approval at the date of the occurrence of the defective corporate action, the ratification of the defective corporate action approved in the action taken by the directors under subsection (a) shall be submitted to the members for approval in accordance with Section 10A-3A-1.23.
(d) If the certificate of incorporation of a nonprofit corporation in effect at the time action under subsection (a) is taken requires the approval of a person or group of persons specified in the certificate of incorporation or would have required approval of that person or group of persons at the date of the occurrence of the defective corporate action, the ratification of the defective corporate action approved in the action taken by the directors under subsection (a) shall be submitted to that person or group of persons for approval in accordance with Section 10A-3A-1.23.
(e) Unless otherwise provided in the action taken by the board of directors under subsection (a), after the action by the board of directors has been taken and, if required, approved in accordance with subsection (c) or subsection (d), the board of directors may abandon the ratification at any time before the validation effective time without further action of the members, if any, or the person or group of persons, if any, specified in the certificate of incorporation.
(Act 2023-503, §1.)
(a) The quorum and voting requirements applicable to a ratifying action by the board of directors under Section 10A-3A-1.22(a) shall be the quorum and voting requirements applicable to the corporate action proposed to be ratified at the time the ratifying action is taken.
(b) If the ratification of the defective corporate action requires approval by the members under Section 10A-3A-1.22(c), and if the approval is to be given at a meeting, the membership nonprofit corporation shall notify each holder of valid and putative membership interests, regardless of whether entitled to vote of (i) the date of the action by the board of directors under Section 10A-3A-1.22(a) which shall be the record date and (ii) the date of the occurrence of the defective corporate action, provided that notice shall not be required to be given to holders of valid or putative membership interests whose identities or addresses for notice cannot be determined from the records of the membership nonprofit corporation. The notice must state that the purpose, or one of the purposes, of the meeting, is to consider ratification of a defective corporate action and must be accompanied by (i) either a copy of the action taken by the board of directors in accordance with Section 10A-3A-1.22(a) or the information required by Section 10A-3A-1.22(a)(1) through (a)(4), and (ii) a statement that any claim that the ratification of the defective corporate action and any putative membership interest issued as a result of the defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought within 120 days from the applicable validation effective time.
(c) Except as provided in subsection (d) with respect to the voting requirements to ratify the election of a director, the quorum and voting requirements applicable to the approval by the members, if any, and if none, by the directors shall be the quorum and voting requirements applicable to the corporate action proposed to be ratified at the time of the member or director approval.
(d) The approval by members to ratify the election of a director requires that the votes cast within the voting group favoring the ratification exceed the votes cast opposing the ratification of the election at a meeting at which a quorum is present.
(e) Putative membership interests on the date of the action by the board of directors under Section 10A-3A-1.22(a) (and without giving effect to any ratification of putative membership interests that becomes effective as a result of the vote) shall neither be entitled to vote nor counted for quorum purposes in any vote to approve the ratification of any defective corporate action.
(f) If the approval under this section of putative membership interests would result in an overissue, in addition to the approval required by Section 10A-3A-1.22, approval of an amendment to the certificate of incorporation under Article 9 to increase the number of membership interests of an authorized class or to authorize the creation of a class of membership interests so there would be no overissue shall also be required.
(g) If the ratification of the defective corporate action requires approval by a person or group of persons specified in the certificate of incorporation, the directors shall provide that person or group of persons with (i) either a copy of the action taken by the board of directors in accordance with Section 10A-3A-1.22(a) or the information required by Section 10A-3A-1.22(a)(1) through (a)(4), and (ii) a statement that any claim that the ratification of the defective corporate action and any putative membership interest issued as a result of the defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought within 120 days from the applicable validation effective time.
(Act 2023-503, §1; Act 2024-413, §1.)
(a) In a membership nonprofit corporation, unless member approval is required under Section 10A-3A-1.22(c), prompt notice of an action taken under Section 10A-3A-1.22 shall be given to each holder of a valid and putative membership interest in the membership nonprofit corporation, regardless of whether entitled to vote, as of: (i) the date of the action by the board of directors; and (ii) the date of the defective corporate action ratified, provided that notice shall not be required to be given to holders of a valid and putative membership interest whose identities or addresses for notice cannot be determined from the records of the nonprofit corporation.
(b) The notice set forth in subsection (a) must contain: (i) either a copy of the action taken by the board of directors in accordance with Section 10A-3A-1.22(a) or (b) or the information required by Section 10A-3A-1.22(a)(1) through (a)(4) or Section 10A-3A-1.22(b)(1) through (b)(3), as applicable; and (ii) a statement that any claim that the ratification of the defective corporate action and any putative membership interest issued as a result of the defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought within 120 days from the applicable validation effective time.
(c) In a membership nonprofit corporation, no notice under this section is required with respect to any action required to be submitted to members for approval under Section 10A-3A-1.22(c) if notice is given in accordance with Section 10A-3A-1.24(b).
(d) A notice required by this section may be given in any manner permitted by Section 10A-3A-1.03.
(Act 2023-503, §1.)
From and after the validation effective time, and without regard to the 120-day period during which a claim may be brought under Section 10A-3A-1.27:
(a) Each defective corporate action ratified in accordance with Section 10A-3A-1.22 shall not be void or voidable as a result of the failure of authorization identified in the action taken under Section 10A-3A-1.22(a) or (b) and shall be deemed a valid corporate action effective as of the date of the defective corporate action;
(b) The issuance of each putative membership interest purportedly issued pursuant to a defective corporate action identified in the action taken under Section 10A-3A-1.22 shall not be void or voidable, and each putative membership interest shall be deemed to be an identical membership interest as of the time it was purportedly issued; and
(c) Any corporate action taken subsequent to the defective corporate action ratified in accordance with this Division B of Article 1 in reliance on the defective corporate action having been validly effected and any subsequent defective corporate action resulting directly or indirectly from the original defective corporate action shall be valid as of the time taken.
(Act 2023-503, §1.)
(a) If the defective corporate action ratified under this Division B of Article 1 would have required under any other section of this chapter a filing instrument to be delivered to a filing officer for filing and either (i) the filing instrument requires any change to give effect to the defective corporate action in accordance with Division B of Article 1 (including any change to the date and time of the effectiveness of the filing instrument) or (ii) a filing instrument under any other section of this chapter was not previously delivered to a filing officer for filing in respect of the defective corporate action, then, in lieu of a filing instrument otherwise required by this chapter, the nonprofit corporation shall deliver a certificate of validation to the appropriate filing officer for filing in accordance with this section, and that certificate of validation shall serve to amend or substitute for any other filing instrument with respect to the defective corporate action required by this chapter.
(b) The certificate of validation must set forth:
(1) the name of the nonprofit corporation;
(2) the unique identifying number or other designation as assigned by the Secretary of State;
(3) a statement that the defective corporate action was ratified in accordance with Section 10A-3A-1.22, including the date on which the board of directors ratified that defective corporate action, and if applicable, the date on which the members approved the ratification of that defective corporate action, and the date on which the person or group of persons specified in the certificate of incorporation approved the ratification of that defective corporate action; and
(4) the information required by subsection (c).
(c) The certificate of validation must also contain the following information:
(1) if a filing instrument was previously delivered to a filing officer for filing in respect of the defective corporate action and that filing instrument requires any change to give effect to the ratification of that defective corporate action in accordance with Section 10A-3A-1.22, the certificate of validation must set forth (i) the name, title, and filing date of the filing instrument previously delivered to a filing officer for filing and any certificate of correction to that filing instrument, (ii) a statement that a filing instrument containing all of the information required to be included under the applicable section or sections of this chapter to give effect to that defective corporate action is attached as an exhibit to the certificate of validation, and (iii) the date and time that filing instrument is deemed to have become effective; or
(2) if a filing instrument was not previously delivered to a filing officer for filing in respect of the defective corporate action and the defective corporate action ratified under Section 10A-3A-1.22 would have required a filing instrument under any other section of this chapter, the certificate of validation must set forth (i) a statement that a filing instrument containing all of the information required to be included under the applicable section or sections of this chapter to give effect to that defective corporate action is attached as an exhibit to the certificate of validation, and (ii) the date and time that filing instrument is deemed to have become effective.
(Act 2023-503, §1; Act 2024-413, §1.)
(a) Upon application by the nonprofit corporation, any successor entity to the nonprofit corporation, a director of the nonprofit corporation, any member (if applicable) of the nonprofit corporation, including any member as of the date of the defective corporate action ratified under Section 10A-3A-1.22, the person or group of persons (if applicable) specified in the certificate of incorporation, or any other person claiming to be substantially and adversely affected by a ratification under Section 10A-3A-1.22, the designated court, and if none, the circuit court for the county in which the nonprofit corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the nonprofit corporation’s most recent registered office, is located, may:
(1) determine the validity and effectiveness of any corporate action or defective corporate action;
(2) determine the validity and effectiveness of any ratification under Section 10A-3A-1.22;
(3) determine the validity of any putative membership interest; and
(4) modify or waive any of the procedures specified in Section 10A-3A-1.22 or Section 10A-3A-1.23 to ratify a defective corporate action.
(b) In connection with an action under this section, the court may make findings or orders, and take into account any factors or considerations, regarding any matters as it deems proper under the circumstances.
(c) Service of process of the application under subsection (a) on the nonprofit corporation may be made in any manner provided by statute of this state or by rule of the applicable court for service on the nonprofit corporation, and no other party need be joined in order for the court to adjudicate the matter. In an action filed by the nonprofit corporation, the court may require notice of the action be provided to other persons specified by the court and permit those other persons to intervene in the action.
(d) Notwithstanding any other provision of this section or otherwise under applicable law, any action asserting that the ratification of any defective corporate action and any putative membership interest issued as a result of a defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought within 120 days of the validation effective time.
(Act 2023-503, §1.)
(a) As used in this chapter, unless otherwise specified or unless the context otherwise requires, “qualified director” is a director who, at the time action is to be taken under:
(1) Section 10A-3A-2.02(b)(6), is not a director (i) to whom the limitation or elimination of the duty of an officer to offer potential corporate opportunities to the nonprofit corporation would apply or (ii) who has a material relationship with any other person to whom the limitation or elimination would apply;
(2) Section 10A-3A-8.53 or Section 10A-3A-8.55, (i) is not a party to the proceeding, (ii) is not a director as to whom a transaction is a conflicting interest transaction or who sought a disclaimer of the nonprofit corporation’s interest in a corporate opportunity under Section 10A-3A-8.70, which transaction or disclaimer is challenged, and (iii) does not have a material relationship with a director described in either clause (i) or clause (ii) of this subsection (a)(2);
(3) Sections 10A-3A-8.61 or 10A-3A-8.62, is not a director (i) as to whom the act or transaction is a conflicting interest transaction, (ii) who has a material relationship with another director as to whom the act or transaction is a conflicting interest transaction, or (iii) who has a material relationship with a controlling person that has a material financial interest in the act or transaction; or
(4) Section 10A-3A-8.70, is not a director who (i) pursues or takes advantage of a corporate opportunity, directly, or indirectly through or on behalf of another person or (ii) has a material relationship with a director or officer who pursues or takes advantage of a corporate opportunity, directly, or indirectly through or on behalf of another person.
(b) As used in this chapter, unless otherwise specified or unless the context otherwise requires, a “material relationship” means a familial, financial, professional, employment, or other relationship that would reasonably be expected to impair the objectivity of the director’s judgment when participating in the negotiation, authorization, or approval of the act or transaction at issue.
(c) The presence of one or more of the following circumstances shall not automatically prevent a director from being a qualified director:
(1) designation, nomination, or vote in the election of the director to the current board of directors by any director who is not a qualified director with respect to the matter (or by any person that has a material financial interest in an act or transaction), acting alone or participating with others; or
(2) service as a director of another nonprofit corporation of which a director who is not a qualified director with respect to the matter (or any individual who has a material relationship with that director), is or was also a director.
(Act 2023-503, §1; Act 2026-495, §1.)
(a) A membership nonprofit corporation has delivered written notice or any other report or statement under this chapter, the certificate of incorporation, or the bylaws to all members who share a common address if:
(1) the membership nonprofit corporation delivers one copy of the notice, report, or statement to the common address;
(2) the membership nonprofit corporation addresses the notice, report, or statement to those members either as a group or to each of those members individually or to the members in a form to which each of those members has consented; and
(3) each of those members consents to delivery of a single copy of the notice, report, or statement to the members’ common address.
(b) A consent described in subsection (a)(2) or (a)(3) shall be revocable by any members who deliver written notice of revocation to the membership nonprofit corporation. If a written notice of revocation is delivered, the membership nonprofit corporation shall begin providing individual notices, reports, or other statements to the revoking member no later than 30 days after delivery of the written notice of revocation.
(c) Any member who fails to object by written notice to the membership nonprofit corporation, within 60 days of written notice by the membership nonprofit corporation of its intention to deliver single copies of notices, reports, or statements to members who share a common address as permitted by subsection (a), shall be deemed to have consented to receiving a single copy at the common address; provided that the notice of intention explains that consent may be revoked and the method for revoking.
(Act 2023-503, §1.)
(a) The law of the jurisdiction of formation of a foreign nonprofit corporation governs:
(1) the incorporation and internal affairs of the foreign nonprofit corporation;
(2) the liability of its members as members for the debts, obligations, or other liabilities of the foreign nonprofit corporation; and
(3) the authority of the directors and officers of the foreign nonprofit corporation.
(b) A foreign nonprofit corporation is not precluded from registering to do business in this state because of any difference between the law of the foreign nonprofit corporation’s jurisdiction of formation and the law of this state.
(Act 2023-503, §1.)
Section 10A-1-3.04 shall not apply to this chapter. In order to incorporate a nonprofit corporation, one or more incorporators must execute a certificate of incorporation and deliver it for filing to the Secretary of State.
(Act 2023-503, §1.)
Section 10A-1-3.05 shall not apply to this chapter. Instead:
(a) The certificate of incorporation must set forth:
(1) a name for the nonprofit corporation that satisfies the requirements of Article 5 of Chapter 1;
(2) the street and mailing address of the nonprofit corporation’s initial registered office, the county within this state in which the street and mailing address is located, and the name of the nonprofit corporation’s initial registered agent at that office as required by Article 5 of Chapter 1;
(3) that the nonprofit corporation is incorporated under this chapter;
(4) the name and address of each incorporator; and
(5)(i) if the nonprofit corporation will have members, a statement to that effect; or
(ii) if the nonprofit corporation will not have members, a statement to that effect.
(b) The certificate of incorporation may set forth:
(1) the names and addresses of the individuals who are to serve as the initial directors;
(2) provisions not inconsistent with law regarding:
(i) the purpose or purposes for which the nonprofit corporation is organized;
(ii) managing the activities and regulating the affairs of the nonprofit corporation;
(iii) defining, limiting, and regulating the powers of the nonprofit corporation, its board of directors, and the members;
(iv) the characteristics, qualifications, rights, limitations, and obligations attaching to each or any class of members;
(v) limiting a member’s right to inspect and copy the records of the nonprofit corporation under Section 10A-3A-4.02(b);
(vi) the distribution of assets on dissolution;
(vii) provisions for the election, appointment, or designation of directors;
(viii) provisions granting inspection rights to a person or group of persons under Section 10A-3A-4.07; and
(ix) provisions specifying a person or group of persons whose approval is required under Sections 10A-3A-9.30, 10A-3A-10.04, 10A-3A-11.04, 10A-3A-12.08, or 10A-3A-13.08;
(3) any provision that under this chapter is permitted to be set forth in the certificate of incorporation or required or permitted to be set forth in the bylaws;
(4) a provision eliminating or limiting the liability of a director or officer to a nonprofit corporation or its members for money damages for any action taken, or any failure to take any action, as a director or officer, except liability for (i) the amount of a financial benefit received by a director or officer to which the director or officer is not entitled, (ii) an intentional infliction of harm on the nonprofit corporation or its members, (iii) in the case of a director, a violation of Section 10A-3A-8.32, (iv) an intentional violation of criminal law, or (v) in the case of an officer, any claim by or in the right of the nonprofit corporation;
(5) a provision permitting or making obligatory indemnification of a director for liability as defined in Section 10A-3A-8.50 to any person for any action taken, or any failure to take any action, as a director, except liability for (i) receipt of a financial benefit to which the director is not entitled, (ii) an intentional infliction of harm on the nonprofit corporation or its members, (iii) a violation of Section 10A-3A-8.32, or (iv) an intentional violation of criminal law;
(6) a provision limiting or eliminating any duty of a director or any other person to offer the nonprofit corporation the right to have or participate in any, or one or more classes or categories of, corporate opportunities, before the pursuit or taking of the corporate opportunity by the director or other person; provided that the application of that provision to an officer or a related person of that officer (i) also requires approval of that application by the board of directors, subsequent to the effective date of the provision, by action of the disinterested or qualified directors taken in compliance with the same procedures as are set forth in Section 10A-3A-8.70; and (ii) may be limited by the authorizing action of the board of directors; and
(7) provisions required if the nonprofit corporation is to be exempt from taxation under federal, state, or local law.
(c) The certificate of incorporation need not set forth any of the corporate powers enumerated in Sections 10A-1-2.11, 10A-1-2.12, and 10A-1-2.13.
(d) Provisions of the certificate of incorporation may be made dependent upon facts objectively ascertainable outside the certificate of incorporation in accordance with Section 10A-3A-1.04.
(e) As used in this section, the term “control” or “controlled” has the meaning specified in Section 10A-3A-8.60 and the term “related person” means:
(i) the individual’s spouse;
(ii) a child, stepchild, grandchild, parent, stepparent, grandparent, sibling, stepsibling, half sibling, aunt, uncle, niece, or nephew (or spouse of any such person) of the individual or of the individual’s spouse;
(iii) a natural person living in the same home as the individual; (iv) an entity (other than the nonprofit corporation or an entity controlled by the nonprofit corporation) controlled by the individual or any person specified above in this definition;
(v) a domestic or foreign:
(A) business or nonprofit corporation (other than the nonprofit corporation or an entity controlled by the nonprofit corporation) of which the individual is a director,
(B) unincorporated entity of which the individual is a general partner or a member of the governing authority, or
(C) individual, trust, or estate for whom or of which the individual is a trustee, guardian, personal representative, or like fiduciary; or
(vi) a person that is, or an entity that is, controlled by, an employer of the individual.
(f) The certificate of incorporation may not contain any provision that would impose liability on a member or a director for the attorney’s fees or expenses of the nonprofit corporation or any other party in connection with an internal corporate claim, as defined in Section 10A-3A-2.07(c), or in connection with a claim that a member, director, or a person or group of persons specified in the certificate of incorporation, acting in that person’s capacity as a member, director, or person or group of persons specified in the certificate of incorporation, has brought in an action, suit, or proceeding described in Section 10A-3A-2.07(b).
(g) The certificate of incorporation is a part of a binding contract between the nonprofit corporation and (i) the members in a membership nonprofit corporation; and (ii) the directors in a nonmembership nonprofit corporation, subject to the provisions of this chapter.
(h) For purposes of subsection (b)(4) only, unless the certificate of incorporation otherwise provides, “officer” means an individual appointed or elected in accordance with Section 10A-3A-8.40 as (i) president, chief executive officer, chief operating officer, chief financial officer, chief legal officer, secretary, controller, treasurer, or chief accounting officer of the nonprofit corporation and (ii) any officer of the nonprofit corporation designated by resolution of the board of directors as an “officer” for purposes of subsection (b)(4). The board of directors may from time to time by resolution determine that one or more of the officers designated in accordance with subsection (h)(ii) shall no longer be an “officer” for purposes of subsection (b)(4), but no such resolution shall be effective as to any such officer, or any act or omission of any such officer, prior to the adoption of such resolution.
(i) No provision in the certificate of incorporation pursuant to subsection (b)(4) shall eliminate or limit the liability of a director or officer for any act or omission occurring prior to the date when the provision in the certificate of incorporation becomes effective. Any amendment, repeal, or elimination of a provision in the certificate of incorporation pursuant to subsection (b)(4) shall not affect its application with respect to an act or omission by a director or officer occurring before the amendment, repeal, or elimination unless the provision in the certificate of incorporation provides otherwise at the time of the act or omission.
(Act 2023-503, §1; Act 2024-413, §1; Act 2026-495, §1.)
All persons purporting to act as or on behalf of a nonprofit corporation, knowing there was no incorporation under this chapter, are jointly and severally liable for all liabilities created while so acting.
(Act 2023-503, §1.)
(a) After incorporation:
(1) if initial directors are named in the certificate of incorporation, the initial directors shall hold an organizational meeting, at the call of a majority of the directors, to complete the organization of the nonprofit corporation by appointing officers, adopting bylaws, and carrying on any other business brought before the meeting; or
(2) if initial directors are not named in the certificate of incorporation, the incorporator or incorporators shall hold an organizational meeting at the call of a majority of the incorporators:
(i) to elect initial directors and complete the organization of the nonprofit corporation; or
(ii) to elect a board of directors who shall complete the organization of the nonprofit corporation.
(b) Action required or permitted by this chapter to be taken by incorporators at an organizational meeting may be taken without a meeting if the action taken is evidenced by one or more written consents describing the action taken and signed by each incorporator.
(Act 2023-503, §1.)
(a) The incorporators or board of directors of a nonprofit corporation shall adopt initial bylaws for the nonprofit corporation.
(b) The bylaws of a nonprofit corporation may contain any provision that is not inconsistent with law or the certificate of incorporation.
(c) The bylaws are a part of a binding contract between the nonprofit corporation and (i) the members in a membership nonprofit corporation and (ii) the directors in a nonmembership nonprofit corporation, subject to the provisions of this chapter.
(Act 2023-503, §1.)
(a) Unless the certificate of incorporation provides otherwise, bylaws may be adopted to be effective only in an emergency defined in subsection (d). The emergency bylaws, which are subject to amendment or repeal in accordance with Section 10A-3A-9.20, may make all provisions necessary for managing the nonprofit corporation during the emergency, including:
(1) procedures for calling a meeting of the board of directors;
(2) quorum requirements for the meeting; and
(3) designation of additional or substitute directors.
(b) All provisions of the regular bylaws not inconsistent with the emergency bylaws remain effective during the emergency. The emergency bylaws are not effective after the emergency ends.
(c) Corporate action taken in good faith in accordance with the emergency bylaws:
(1) binds the nonprofit corporation; and
(2) may not be used to impose liability on a member, director, officer, employee, or agent of the nonprofit corporation.
(d) An emergency exists for purposes of this section if a quorum of the board of directors cannot readily be assembled because of some catastrophic event.
(Act 2023-503, §1.)
(a) The certificate of incorporation or the bylaws may require, consistent with applicable jurisdictional requirements, that any or all internal corporate claims shall be brought exclusively in any specified court or courts of this state and, if so specified, in any additional courts in this state or in any other jurisdictions with which the nonprofit corporation has a reasonable relationship and no provision of the certificate of incorporation or the bylaws may prohibit bringing those claims in the courts of this state or require those claims to be determined by arbitration.
(b) With respect to claims that are not internal corporate claims, the certificate of incorporation or bylaws may require members, directors, officers, and the person or group of persons specified in the certificate of incorporation, when acting in that person’s capacity as a member, director, officer, or person or group of persons specified in the certificate of incorporation, to bring any or all such claims only in any specified court or courts of this state and, if so specified, in any additional courts in this state or in any other jurisdictions with which the nonprofit corporation has a reasonable relationship, if those claims relate to the business and affairs of the nonprofit corporation, the conduct of its affairs, or the rights or powers of the nonprofit corporation or its members, directors, officers, or person or persons specified in the certificate of incorporation; provided that such requirement is consistent with applicable jurisdictional requirements and allows a member, director, officer, and person or group of persons specified in the certificate of incorporation to bring such claims in at least one court in this state that has jurisdiction over those claims.
(c) “Internal corporate claim” means, for the purposes of this section, any claim, action, suit, or proceeding (i) that is based upon a violation of a duty under the laws of this state by a current or former director, officer, or member in their capacities as such, (ii) that arises from, is pursuant to, or seeks to interpret, apply, enforce, or determine the validity of, any provision of this chapter, the certificate of incorporation, the bylaws, or any agreement entered into pursuant to Section 10A-3A-7.30 to which the nonprofit corporation is a party or a stated beneficiary thereof, or (iii) that is governed by the internal affairs doctrine that is not included in (i) through (ii) above.
(d) This section does not prohibit any nonprofit corporation from consenting, or require any nonprofit corporation to consent, to any alternative forum in any instance.
(Act 2023-503, §1; Act 2026-495, §1.)
(a) Every nonprofit corporation has the purpose of engaging in any lawful activity unless a more limited purpose is set forth in the certificate of incorporation.
(b) If a nonprofit corporation will engage in an activity that is subject to regulation under another statute of the state, the nonprofit corporation may incorporate under this chapter only if not prohibited by, and subject to all limitations of, the other statute.
(c) Labor unions, cooperative organizations, and organizations subject to any of the provisions of the insurance laws of Alabama may not be organized under this chapter.
(d) Whenever 10 or more retail merchants wish to form a nonprofit association, cooperative society, or corporation in the sense of paying interest or dividends on stock, but for mutual benefit through the application of cooperation or other economic principles, they may become a body corporate in the manner provided in this chapter.
(e) Whenever 10 or more wholesale merchants wish to form a nonprofit association, cooperative society, or corporation in the sense of paying interest or dividends on stock, but for mutual benefit through the application of cooperation or other economic principles, they may become a body corporate in the manner provided in this chapter.
(Act 2023-503, §1.)
Unless its certificate of incorporation provides otherwise, every nonprofit corporation has perpetual duration and succession in its corporate name and has the same powers as an individual to do all things necessary or convenient to carry out its activities and affairs, including all entity powers provided in Section 10A-1-2.11, Section 10A-1-2.12, and Section 10A-1-2.13.
(Act 2023-503, §1.)
(a) In anticipation of or during an emergency defined in subsection (d), the board of directors of a nonprofit corporation may:
(1) modify lines of succession to accommodate the incapacity of any director, officer, employee, or agent; and
(2) relocate the principal office, designate alternative principal offices or regional offices, or authorize the officers to do so.
(b) During an emergency defined in subsection (d), unless emergency bylaws provide otherwise:
(1) notice of a meeting of the board of directors need be given only to those directors whom it is practicable to reach and may be given in any practicable manner; and
(2) one or more officers of the nonprofit corporation present at a meeting of the board of directors may be deemed to be directors for the meeting, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum.
(c) Corporate action taken in good faith during an emergency under this section to further the ordinary business affairs of the nonprofit corporation:
(1) binds the nonprofit corporation; and
(2) may not be used to impose liability on a member, director, officer, employee, or agent.
(d) An emergency exists for purposes of this section if a quorum of the board of directors cannot readily be assembled because of some catastrophic event.
(Act 2023-503, §1.)
(a) Except as provided in subsection (b), the validity of corporate action may not be challenged on the ground that the nonprofit corporation lacks or lacked power to act.
(b) The power of a nonprofit corporation to act may be challenged:
(1) in a proceeding by a member or director against the nonprofit corporation to enjoin the act;
(2) in a proceeding by the nonprofit corporation, directly, or through a receiver, trustee, or other legal representative, against an incumbent or former director, officer, employee, or agent of the nonprofit corporation; or
(3) in a proceeding by the Attorney General.
(c) In a proceeding by a member or a director under subsection (b)(1) to enjoin an unauthorized corporate act, the court may enjoin or set aside the act, if equitable and if all affected persons are parties to the proceeding, and may award damages for loss (other than anticipated profits) suffered by the nonprofit corporation or another party because of enjoining the unauthorized corporate act.
(Act 2023-503, §1.)
Action validly taken pursuant to one provision of this chapter shall not be deemed invalid solely because it is identical or similar in substance to an action that could have been taken pursuant to some other provision of this chapter but fails to satisfy one or more requirements prescribed by such other provision.
(Act 2025-281, §8.)
(a) A nonprofit corporation must maintain the following records:
(1) its certificate of incorporation as currently in effect;
(2) any notices to members referred to in Section 10A-3A-1.04(c)(5) specifying facts on which a filed document is dependent if those facts are not included in the certificate of incorporation or otherwise available as specified in Section 10A-3A-1.04(c)(5);
(3) its bylaws as currently in effect;
(4) all written communications within the past three years to members generally;
(5) minutes of all meetings of, and records of all actions taken without a meeting by, its members, its board of directors, and board committees established under Section 10A-3A-8.25; and
(6) a list of the names and business addresses of its current directors and officers.
(b) A nonprofit corporation shall maintain all annual financial statements prepared for the nonprofit corporation for its last three fiscal years (or such shorter period of existence) and any audit or other reports with respect to those financial statements.
(c) A nonprofit corporation shall maintain accounting records in a form that permits preparation of the financial statements.
(d) A membership nonprofit corporation must maintain a record of its current members in alphabetical order by class of membership showing the address for each member to which notices and other communications from the membership nonprofit corporation are to be sent. In addition if a member has provided an electronic mail address to the membership nonprofit corporation or has consented to receive notices or other communications by electronic mail or other electronic transmission, the record of members shall include the electronic mail or other electronic transmission address of the member if notices or other communications are being delivered by the membership nonprofit corporation to the member at that electronic mail or other electronic transmission address pursuant to Section 10A-3A-1.03(d). An electronic mail address of a member shall be deemed to be provided by a member if it is contained in a communication to the membership nonprofit corporation by or on behalf of the member, unless the communication expressly indicates that the electronic mail address may not be used to deliver notices or other communications.
(e) A nonprofit corporation must maintain the records specified in this section in a manner so that they may be made available for inspection within a reasonable time.
(Act 2023-503, §1.)
Subject to subsection (h):
(a) A member of a membership nonprofit corporation is entitled to inspect and copy, during regular business hours at the membership nonprofit corporation’s principal office, any of the records of the membership nonprofit corporation described in Section 10A-3A-4.01(a), excluding minutes of meetings of, and records of actions taken without a meeting by, the membership nonprofit corporation’s board of directors and board committees established under Section 10A-3A-8.25, if the member gives the membership nonprofit corporation a signed written notice of the member’s demand at least five business days before the date on which the member wishes to inspect and copy.
(b) A member of a membership nonprofit corporation is entitled to inspect and copy, during regular business hours at a reasonable location specified by the membership nonprofit corporation, any of the following records of the membership nonprofit corporation if the member meets the requirements of subsection (c) and gives the membership nonprofit corporation a signed written notice of the member’s demand at least five business days before the date on which the member wishes to inspect and copy:
(1) the financial statements of the membership nonprofit corporation maintained in accordance with Section 10A-3A-4.01(b); provided, however, that the membership nonprofit corporation may deliver or make available the financial statements to the requesting member by posting them on the membership nonprofit corporation’s website or by other generally recognized means. If financial statements have been prepared for the membership nonprofit corporation on the basis of generally accepted accounting principles for that specified period, the membership nonprofit corporation shall deliver or make available those financial statements to the requesting member. If the annual financial statements to be delivered or made available to the requesting member are audited or otherwise reported upon by a public accountant, the report shall also be delivered or made available to the requesting member.
(2) the accounting records of the membership nonprofit corporation maintained in accordance with Section 10A-3A-4.01(c) that permitted the preparation of the financial statements maintained in accordance with Section 10A-3A-4.01(b); and
(3) excerpts from minutes of any meeting of, or records of any actions taken without a meeting by, the board of directors and board committees maintained in accordance with Section 10A-3A-4.01(a); and
(4) subject to Section 10A-3A-4.06, the record of members maintained in accordance with Section 10A-3A-4.01(d); provided however, the membership nonprofit corporation may withhold the record of members maintained in accordance with Section 10A-3A-4.01(d) if the demanding member of the membership nonprofit corporation has used, or has aided or abetted any person to use, the record of members in violation of Section 10A-3A-4.06.
(c)(1) A member may inspect and copy the records described in subsection (b) only if:
(i) the member has delivered to the membership nonprofit corporation a signed written notice of the member’s demand at least five business days before the date on which the member wishes to inspect and copy;
(ii) the member’s demand is made in good faith and for a proper purpose;
(iii) the member’s demand describes with reasonable particularity the member’s purpose and the records the member desires to inspect; and
(iv) the records are directly related to the member’s purpose.
(2) For purposes of this subsection (c), a proper purpose shall mean a purpose directly related to the member’s interest as a member; provided, however, that a demand shall not be for a proper purpose if the membership nonprofit corporation reasonably determines that the demand is in connection with an active or pending civil lawsuit to which the membership nonprofit corporation, or its affiliate, and the member, or the member’s affiliate, are, or are expected to be, adversarial named parties.
(d) The membership nonprofit corporation may redact portions of the records to be inspected and copied under subsections (a) and (b) to the extent the portions so redacted are not directly related to the member’s purpose. The membership nonprofit corporation may also impose reasonable restrictions and conditions on access to and use of the records to be inspected and copied under subsections (a) and (b), including designating information confidential and imposing nondisclosure and safeguarding, and may further keep confidential from its members and other persons, for a period of time as the membership nonprofit corporation deems reasonable any information that the membership nonprofit corporation reasonably believes to be in the nature of a trade secret or other information the disclosure of which the membership nonprofit corporation in good faith believes is not in the best interest of the membership nonprofit corporation or could damage the membership nonprofit corporation or its activities or affairs, or that the membership nonprofit corporation is required by law or by agreement with a third party to keep confidential. In any dispute concerning the reasonableness of a restriction under this subsection, the membership nonprofit corporation has the burden of proving reasonableness.
(e) For any meeting of members for which the record date for determining members entitled to vote at the meeting is different than the record date for notice of the meeting, any person who becomes a member subsequent to the record date for notice of the meeting and is entitled to vote at the meeting is entitled to obtain from the membership nonprofit corporation upon request the notice and any other information provided by the membership nonprofit corporation to members in connection with the meeting, unless the membership nonprofit corporation has made that information generally available to members by posting it on the membership nonprofit corporation’s website or by other generally recognized means. Failure of a membership nonprofit corporation to provide that information does not affect the validity of action taken at the meeting.
(f) The right of inspection granted by subsection (b) may be limited by a membership nonprofit corporation’s certificate of incorporation.
(g) This section does not affect
the right of a member to inspect records under Section 10A-3A-7.20 or, if the member is in litigation with the membership nonprofit corporation, to the same extent as any other litigant.
(h) The right of a member to inspect and copy the records described in subsections (a) and (b) may be denied by the membership nonprofit corporation if the membership nonprofit corporation determines that the demanding member has within two years preceding his, her, or its demand improperly used any information secured through any prior examination of the records of the membership nonprofit corporation.
(Act 2023-503, §1; Act 2026-495, §1.)
If a member is entitled to inspection and copying rights under Section 10A-3A-4.02:
(a) A member may appoint an agent or attorney to exercise the member’s inspection and copying rights under Section 10A-3A-4.02. In that case, the demand shall be accompanied by a power of attorney or other writing which authorizes the agent or attorney to so act on behalf of the member.
(b) The membership nonprofit corporation may, if reasonable, satisfy the right of a member to copy records under Section 10A-3A-4.02 by furnishing to the member copies by photocopy or other means as are chosen by the membership nonprofit corporation, including furnishing copies through electronic transmission.
(c) The membership nonprofit corporation may comply at its expense with a member’s demand to inspect the record of members under Section 10A-3A-4.02(b)(4) by providing the member with a list of members that was compiled no earlier than the date of the member’s demand.
(d) The membership nonprofit corporation may impose a reasonable charge to cover the costs of providing copies of documents to the member, which may be based on an estimate of those costs.
(Act 2023-503, §1; Act 2026-495, §1.)
If a member is entitled to inspection and copying rights under Section 10A-3A-4.02:
(a) If a membership nonprofit corporation does not allow a member who complies with Section 10A-3A-4.02(a) to inspect and copy any records required by that section to be available for inspection, the designated court, and if none, the circuit court for the county in which the membership nonprofit corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the membership nonprofit corporation’s most recent registered office is located may summarily order inspection and copying of the records demanded at the membership nonprofit corporation’s expense upon application of the member.
(b) If a membership nonprofit corporation does not within a reasonable time allow a member who complies with Section 10A-3A-4.02(b) to inspect and copy the records as required by that section, the member who complies with Section 10A-3A-4.02(c) may apply to the designated court, and if none, the circuit court for the county in which the membership nonprofit corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the membership nonprofit corporation’s most recent registered office is located for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this subsection on an expedited basis.
(c) If the court orders inspection and copying of the records demanded under Section 10A-3A-4.02(b), it may impose reasonable restrictions on their confidentiality, use, or distribution by the demanding member and the court shall also order the membership nonprofit corporation to pay the member’s expenses incurred to obtain the order unless the membership nonprofit corporation establishes that it refused inspection in good faith because the membership nonprofit corporation had:
(1) a reasonable basis for doubt about the right of the member to inspect the records demanded; or
(2) required reasonable restrictions on the confidentiality, use, or distribution of the records demanded to which the demanding member had been unwilling to agree. If the membership nonprofit corporation has declined to deliver or make available the records because the member had been unwilling to agree to restrictions proposed by the membership nonprofit corporation on the confidentiality, use, or distribution of the records, the membership nonprofit corporation shall have the burden of demonstrating that the restrictions proposed by the membership nonprofit corporation were reasonable.
(Act 2023-503, §1; Act 2026-495, §1.)
(a) A director of a nonprofit corporation is entitled to inspect and copy the books, records, and documents of the nonprofit corporation at any reasonable time to the extent reasonably related to the performance of the director’s duties as a director, including duties as a member of a board committee, but not for any other purpose or in any manner that would violate any duty to the nonprofit corporation.
(b) The designated court, and if none, the circuit court for the county in which the nonprofit corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the nonprofit corporation’s most recent registered office is located may order inspection and copying of the books, records, and documents at the nonprofit corporation’s expense, upon application of a director who has been refused inspection rights, unless the nonprofit corporation establishes that the director is not entitled to inspection rights. The court shall dispose of an application under this subsection on an expedited basis.
(c) If an order is issued, the court may include provisions protecting the nonprofit corporation from undue burden or expense, and prohibiting the director from using information obtained upon exercise of the inspection rights in a manner that would violate a duty to the nonprofit corporation, and may also order the nonprofit corporation to reimburse the director for the director’s expenses incurred in connection with the application.
(Act 2023-503, §1.)
(a) Unless otherwise permitted by the certificate of incorporation or bylaws of a membership nonprofit corporation, a membership list or any part thereof may not be obtained or used by any person for any purpose unrelated to a member’s interest as a member without the consent of the board of directors, including without limitation:
(1) to solicit money or property unless the money or property will be used solely to solicit the votes of the members in an election to be held by the membership nonprofit corporation;
(2) for any commercial purpose; or
(3) to be sold or purchased by any person.
(b) Instead of making a membership list available for inspection and copying under this Division, a membership nonprofit corporation may elect to proceed under the procedures set forth in Section 10A-3A-7.20(e).
(Act 2023-503, §1.)
If the certificate of incorporation provides approval rights to a person or group of persons as authorized in Section 10A-3A-2.02(b)(ix), then the certificate of incorporation may grant inspection rights to that person or group of persons. Any grant of inspection rights under this section may set forth the scope, rights, limits, restrictions, conditions, confidentiality, and any other matter related to that grant of the inspection rights.
(Act 2023-503, §1.)
[Repealed]
THIS SECTION WAS REPEALED BY ACT 2026-495, EFFECTIVE AUGUST 1, 2026.
(Act 2023-503, §1; Act 2026-495, §5.)
(a) A nonprofit corporation may have one or more classes of members or may have no members. If the nonprofit corporation has one or more classes of members, the designation of the class or classes, the manner of admission and the qualifications and rights of the members of each class shall be set forth in the certificate of incorporation or bylaws. Subject to Section 10A-3A-14.01(c), if the nonprofit corporation will have members, that fact shall be set forth in the certificate of incorporation. If the nonprofit corporation will not have members, that fact shall be set forth in the certificate of incorporation.
(b) Except as otherwise provided in this chapter or in the certificate of incorporation, if the certificate of incorporation of a nonprofit corporation states that the nonprofit corporation will have members, but that nonprofit corporation has in fact no members entitled to vote on a matter, then any provision of this chapter or any other provision of law requiring notice to, the presence of, or the vote, consent, or other action by members of that nonprofit corporation in connection with the matter shall be satisfied by notice to, the presence of, or the vote, consent, or other action by the board of directors of the nonprofit corporation.
(c) Except as otherwise provided in the certificate of incorporation, if the certificate of incorporation of a nonprofit corporation states that the nonprofit corporation will not have members, then notice to, the presence of, or the vote, consent, or other action by board of directors of the nonprofit corporation in connection with the matter shall be satisfied by notice to, the presence of, or the vote, consent, or other action by the board of directors of the nonprofit corporation.
(Act 2023-503, §1.)
(a) A person may not be admitted as a member of a nonprofit corporation without that person’s consent.
(b) If a membership nonprofit corporation provides certificates of membership to the members, the certificates shall not be registered or transferable except as provided in the certificate of incorporation or bylaws. Each certificate of membership shall comply with Sections 10A-1-3.42, 10A-1-3.43(b), and 10A-1-3.44. No membership certificate shall be issued in bearer form.
(c) A person is not a member of a nonprofit corporation unless (i) the nonprofit corporation is a membership nonprofit corporation and (ii) the person meets the definition of a “member” in Section 10A-3A-1.02, regardless of whether the nonprofit corporation designates or refers to the person as a member.
(d) A person is not a member of a nonmembership nonprofit corporation, regardless of whether the nonmembership nonprofit corporation designates or refers to the person as a member.
(Act 2023-503, §1.)
Unless otherwise provided by law or in the certificate of incorporation or bylaws of a membership nonprofit corporation, the board of directors shall establish conditions for admission of members (for such contribution, if any, as the board of directors may determine), admit members, and issue memberships.
(Act 2023-503, §1.)
Except as otherwise provided in the certificate of incorporation or bylaws, each member of a membership nonprofit corporation has the same rights and obligations as every other member with respect to voting, dissolution, membership transfer, and other matters.
(Act 2023-503, §1.)
(a) Except as provided in the certificate of incorporation or bylaws, a member of a membership nonprofit corporation may not transfer a membership or any right arising therefrom.
(b) Where the right to transfer a membership has been provided, a restriction on that right shall not be binding with respect to a member holding a membership issued prior to the adoption of the restriction unless the restriction is approved by the affected member.
(Act 2023-503, §1.)
A member of a nonprofit corporation is not personally liable for any liabilities of the nonprofit corporation (including liabilities arising from acts of the nonprofit corporation).
(Act 2023-503, §1.)
(a) A membership nonprofit corporation may levy dues, assessments, fees, fines, late charges, interest, penalties, and other such sums on its members to the extent authorized in the certificate of incorporation or bylaws. Dues, assessments, fees, fines, late charges, interest, penalties, and other such sums may be imposed on members of the same class either alike or in different amounts or proportions, and may be imposed on a different basis on different classes of members. Members of a class may be made exempt from dues, assessments, fees, fines, late charges, interest, penalties, and other such sums to the extent provided in the certificate of incorporation or bylaws.
(b) The amount and method of collection of dues, assessments, fees, fines, late charges, interest, penalties, and other such sums may be fixed in the certificate of incorporation or bylaws, or the certificate of incorporation or bylaws may authorize the board of directors or members to fix the amount and method of collection.
(c) The certificate of incorporation or bylaws may provide reasonable means to enforce the collection of dues, assessments, fees, fines, late charges, interest, penalties, and other such sums, including, but not limited to, termination, suspension, or reinstatement of membership.
(Act 2023-503, §1.)
A person shall not have any right to commence or maintain a derivative action in the right of a nonprofit corporation to enforce a right of the nonprofit corporation.
(Act 2026-495, §3.)
(a) A member of a membership nonprofit corporation may resign at any time.
(b) The resignation of a member does not relieve the member from any obligations incurred or commitments made prior to resignation.
(Act 2023-503, §1.)
(a) A membership in a membership nonprofit corporation may be terminated or suspended for the reasons and in the manner provided in the certificate of incorporation or bylaws.
(b) A proceeding challenging a termination or suspension for any reason must be commenced within one year after the effective date of the termination or suspension.
(c) The termination or suspension of a member does not relieve the member from any obligations incurred or commitments made prior to the termination or suspension.
(Act 2023-503, §1.)
(a) Except as permitted or required by law other than this chapter, or contractual obligations, a nonprofit corporation shall not make distributions to its members, directors, or officers. Any permitted or required distribution is subject to the limitations set forth in subsection (c).
(b) The board of directors of a membership nonprofit corporation may fix the record date for determining members entitled to a distribution, which date may not be retroactive. If the board of directors does not fix a record date for determining members entitled to a distribution, the record date is the date the board of directors authorizes the distribution.
(c) No distribution may be made if, after giving it effect:
(1) the nonprofit corporation would not be able to pay its debts as they become due in the usual course of its activities and affairs; or
(2) the nonprofit corporation’s unrestricted total assets would be less than the sum of its total liabilities other than those liabilities which are solely secured by the nonprofit corporation’s restricted assets.
(d) The board of directors may base a determination that a distribution is not prohibited under subsection (c) either on financial statements prepared on the basis of accounting practices and principles that are reasonable in the circumstances or on a fair valuation or other method that is reasonable in the circumstances.
(e) The effect of a distribution under subsection (c) is measured as of (i) the date the distribution is authorized if the payment occurs within 120 days after the date of authorization or (ii) the date the payment is made if it occurs more than 120 days after the date of authorization.
(f) This section shall not apply to distributions in liquidation under Article 11.
(g) This section shall not apply to a contract or transaction with a member, director, or officer, which contract or transaction is authorized pursuant to Section 10A-3A-8.60.
(Act 2023-503, §1.)
A nonprofit corporation may pay reasonable compensation, reasonable payments made in the ordinary course of the nonprofit corporation’s activities and affairs, or reimburse reasonable expenses to its members, directors, or officers for services rendered and may confer reasonable benefits upon its members or nonmembers in conformity with its purposes.
(Act 2023-503, §1.)
(a) A membership nonprofit corporation may provide in its certificate of incorporation or bylaws that members, upon or subsequent to admission, must make capital contributions. Except as provided in the certificate of incorporation or bylaws, the amount shall be fixed by the board of directors. The requirement of a capital contribution may apply to all members, or to the members of a single class, or to members of different classes in different amounts or proportions.
(b) The adoption or amendment of a capital contribution requirement, whether or not approved by the members, shall not apply to a member who did not vote in favor of the adoption or amendment until 30 days after notice of the adoption or amendment has been delivered to the member.
(Act 2023-503, §1.)
A nonprofit corporation shall not have or issue shares of stock.
(Act 2023-503, §1.)
(a) Unless otherwise provided in the certificate of incorporation, a membership nonprofit corporation shall hold a meeting of members annually at a time stated in or fixed in accordance with the certificate of incorporation or bylaws.
(b) A membership nonprofit corporation may hold regular meetings of the members at times stated in or fixed in accordance with the certificate of incorporation or bylaws.
(c) Unless the board of directors determines to hold the meeting solely by means of remote communication in accordance with Section 10A-3A-7.09(c), annual and regular meetings of the members may be held (i) in or out of this state at the place stated in or fixed in accordance with the certificate of incorporation or bylaws or (ii) if no place is stated in or fixed in accordance with the certificate of incorporation or bylaws, at the membership nonprofit corporation’s principal office.
(d) The failure to hold an annual or regular meeting of the members at the time stated in or fixed in accordance with a membership nonprofit corporation’s certificate of incorporation or bylaws does not affect the validity of any corporate action.
(Act 2023-503, §1.)
(a) Special meetings of the members in a membership nonprofit corporation may be called by the board of directors or by the person or persons as may be authorized by the certificate of incorporation or by the bylaws.
(b) In the event that the certificate of incorporation or bylaws of a membership nonprofit corporation allow members to demand a special meeting of the members, then if not otherwise fixed under Section 10A-3A-7.03 or Section 10A-3A-7.07, the record date for determining members entitled to demand a special meeting shall be the first date on which a signed member’s demand is delivered to the membership nonprofit corporation. No written demand for a special meeting shall be effective unless, within 60 days of the earliest date on which the demand delivered to the membership nonprofit corporation as allowed by the certificate of incorporation or bylaws was signed, written demands signed by members holding at least the percentage of votes specified in or fixed in accordance with the certificate of incorporation or bylaws have been delivered to the membership nonprofit corporation.
(c) Unless the board of directors determines to hold the meeting solely by means of remote participation in accordance with Section 10A-3A-7.09(c), special meetings of members may be held (i) in or out of this state at the place stated in or fixed in accordance with the certificate of incorporation or bylaws or (ii) if no place is stated in or fixed in accordance with the certificate of incorporation or bylaws, at the membership nonprofit corporation’s principal office.
(d) Only business within the purpose or purposes described in the meeting notice required by Section 10A-3A-7.05(c) may be conducted at a special meeting of members.
(Act 2023-503, §1.)
(a) The designated court, and if none, the circuit court for the county in which the membership nonprofit corporation’s principal office is located in this state, and, if none in this state, the circuit court for the county in which the membership nonprofit corporation’s most recent registered office is located may summarily order a meeting to be held:
(1) on application of any member of the membership nonprofit corporation entitled to participate in an annual meeting if an annual meeting was not held or action by written consent in lieu of an annual meeting did not become effective within the earlier of 12 months after the end of the membership nonprofit corporation’s fiscal year or 15 months after its last annual meeting; or
(2) on application of one or more members who signed a demand for a special meeting valid under Section 10A-3A-7.02, if:
(i) notice of the special meeting was not given within 30 days after the first day on which the requisite number of demands have been delivered to the membership nonprofit corporation; or
(ii) the special meeting was not held in accordance with the notice.
(b) The court may fix the time and place of the meeting, determine the members entitled to participate in the meeting, specify a record date or dates for determining members entitled to notice of and to vote at the meeting, prescribe the form and content of the meeting notice, fix the quorum required for specific matters to be considered at the meeting (or direct that the members represented at the meeting constitute a quorum for action on those matters), and enter other orders necessary to accomplish the purpose or purposes of the meeting.
(Act 2023-503, §1.)
(a) Unless otherwise provided in the certificate of incorporation, any action required or permitted by this chapter to be taken at any meeting of the members may be taken without a meeting, and without prior notice, if one or more consents in writing setting forth the action so taken are signed by the members having not less than the minimum number of votes that would be required to authorize or take the action at a meeting at which all members entitled to vote on the action were present and voted. The action must be evidenced by one or more written consents describing the action taken, signed by the members approving the action and delivered to the membership nonprofit corporation for filing by the membership nonprofit corporation with the minutes or corporate records.
(b) If not otherwise fixed under Section 10A-3A-7.07 and if prior action by the board of directors is not required respecting the action to be taken without a meeting, the record date for determining the members entitled to take action without a meeting shall be the first date on which a written consent signed by a member is delivered to the membership nonprofit corporation. If not otherwise fixed under Section 10A-3A-7.07 and if prior action by the board of directors is required respecting the action to be taken without a meeting, the record date shall be the close of business on the day the resolution of the board of directors taking the prior action is adopted. No written consent of a member shall be effective to take the corporate action referred to therein unless, within 60 days of the earliest date on which a consent is delivered to the membership nonprofit corporation as required by this section, written consents signed by sufficient members to take the action have been delivered to the membership nonprofit corporation. Any person signing a consent may provide, whether through instruction to an agent or otherwise, that the consent will be effective at a future time, including a time determined upon the happening of an event, occurring not later than 60 days after the instruction is given or the provision is made, if evidence of the instruction or provision is provided to the membership nonprofit corporation. If a person signs a consent when that person is not a member, then that person’s consent shall not be valid unless that person is a member as of the record date for determining members entitled to consent to the action. Unless a person’s written consent states that it is irrevocable, that written consent may be revoked by that person by a writing to that effect delivered to the membership nonprofit corporation before unrevoked written consents sufficient in number to take the corporate action have been delivered to the membership nonprofit corporation.
(c) A consent signed pursuant to the provisions of this section has the effect of a vote taken at a meeting and may be described as such in any document. Unless the certificate of incorporation, bylaws, or a resolution of the board of directors provides for a reasonable delay to permit tabulation of written consents, the action taken by written consent shall be effective when written consents signed by sufficient members to take the action have been delivered to the membership nonprofit corporation.
(d) If action is taken by less than unanimous written consent of the voting members, the membership nonprofit corporation shall give its nonconsenting voting members written notice of the action not more than 10 days after (i) written consents sufficient to take the action have been delivered to the membership nonprofit corporation or (ii) any later date that tabulation of consents is completed pursuant to an authorization under subsection (c). The notice must reasonably describe the action taken.
(e) The notice requirements in subsection (d) shall not delay the effectiveness of actions taken by written consent, and a failure to comply with those notice requirements shall not invalidate actions taken by written consent, provided that this subsection shall not be deemed to limit judicial power to fashion any appropriate remedy in favor of a member adversely affected by a failure to give the notice within the required time period.
(Act 2023-503, §1; Act 2024-413, §1.)
(a) A membership nonprofit corporation shall notify members of the place, if any, date, and time of each annual, regular, or special meeting of the members no fewer than 10 nor more than 60 days before the meeting date. If the board of directors has authorized participation by means of remote communication pursuant to Section 10A-3A-7.09 for any class of members or voting group, the notice to that class of members or voting group must describe the means of remote communication to be used. The notice must include the record date for determining the members entitled to vote at the meeting, if that date is different from the record date for determining members entitled to notice of the meeting. Unless the certificate of incorporation requires otherwise, the membership nonprofit corporation is required to give notice only to members entitled to vote at the meeting as of the record date for determining the members entitled to notice of the meeting.
(b) Unless this chapter, the certificate of incorporation, or the bylaws require otherwise, notice of an annual or regular meeting of the members need not include a description of the purpose or purposes for which the meeting is called.
(c) Notice of a special meeting of members must include a description of the purpose or purposes for which the meeting is called.
(d) If not otherwise fixed under Section 10A-3A-7.03 or Section 10A-3A-7.07, the record date for determining members entitled to notice of and to vote at an annual, regular, or special meeting of the members is the earlier of (i) the date of the action by the board of directors calling the meeting of the members or (ii) the day before the first notice is delivered to members.
(e) Unless the certificate of incorporation or bylaws require otherwise, if an annual, regular, or special meeting of the members is adjourned to a different place, if any, date, or time (including an adjournment taken to address a technical failure to convene or continue a meeting using remote communication pursuant to Section 10A-3A-7.09), notice need not be given of the new place, if any, date, or time if the new place, if any, date, or time is (i) announced at the meeting before adjournment or (ii) displayed, during the time scheduled for the meeting, on the same electronic network used to enable members and proxy holders to participate in the meeting by means of remote communication. If a new record date for the adjourned meeting is or must be fixed under Section 10A-3A-7.07, however, notice of the adjourned meeting shall be given under this section to members entitled to vote at the adjourned meeting as of the record date fixed for notice of the adjourned meeting.
(Act 2023-503, §1; Act 2024-413, §1.)
(a) A member may waive any notice required by this chapter or the certificate of incorporation or bylaws, before or after the date and time stated in the notice. The waiver must be in writing, be signed by the member entitled to the notice, and be delivered to the membership nonprofit corporation for filing by the membership nonprofit corporation with the minutes or corporate records.
(b) A member’s attendance at a meeting:
(1) waives objection to lack of notice or defective notice of the meeting, unless the member at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; and
(2) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the member objects to considering the matter when it is presented.
(Act 2023-503, §1.)
(a) The certificate of incorporation or bylaws may fix or provide the manner of fixing the record date or dates for one or more voting groups of members to determine the members entitled to notice of a members’ meeting, to demand a special meeting, to vote, or to take any other action. If the certificate of incorporation or bylaws do not fix or provide for fixing a record date, the board of directors may fix the record date.
(b) A record date fixed under this section may not be more than 70 days before the meeting or action requiring a determination of members and may not be retroactive.
(c) A determination of members entitled to notice of or to vote at a members’ meeting is effective for any adjournment of the meeting unless the board of directors fixes a new record date or dates, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting.
(d) If a court orders a meeting adjourned to a date more than 120 days after the date fixed for the original meeting, it may provide that the original record date or dates continues in effect or it may fix a new record date or dates.
(Act 2023-503, §1.)
(a) At each meeting of members, an individual appointed in one of the following ways must preside as chair:
(1) as provided in the certificate of incorporation or bylaws;
(2) in the absence of a provision in the certificate of incorporation or bylaws, by the board of directors; or
(3) in the absence of both a provision in the certificate of incorporation or bylaws and an appointment by the board of directors, by the members at the meeting.
(b) At each meeting of members, the order of business and the rules for the conduct of the meeting must be:
(1) as provided in the certificate of incorporation or bylaws;
(2) in the absence of a provision in the certificate of incorporation or bylaws, established by the board of directors; or
(3) in the absence of both a provision in the certificate of incorporation or bylaws and the establishment by the board of directors, established by the members at the meeting.
(c) Any rules established for, and the conduct of, the meeting must be fair to the members.
(d) At the meeting the chair may announce when the polls close for each matter voted upon. If no announcement is made, the polls close upon the final adjournment of the meeting. After the polls close, no ballots, proxies, or votes, nor any revocations or changes to ballots, proxies, or votes may be accepted.
(Act 2023-503, §1.)
(a) Members of any class or voting group may participate in any meeting of members by means of remote communication to the extent the board of directors authorizes that participation for that class or voting group. Participation as a member by means of remote communication is subject to any guidelines and procedures the board of directors adopts and shall be in conformity with subsection (b).
(b) Members participating in a members’ meeting by means of remote communication shall be deemed present and may vote at that meeting if the membership nonprofit corporation has implemented reasonable measures:
(1) to verify that each person participating remotely as a member is a member; and
(2) to provide the members participating remotely a reasonable opportunity to participate in the meeting and to vote on matters submitted to the members, including an opportunity to communicate, and to read or hear the proceedings of the meeting, substantially concurrently with the proceedings.
(c) Unless the certificate of incorporation or bylaws require the meeting of members to be held at a place, the board of directors may determine that any meeting of members shall not be held at any place and shall instead be held solely by means of remote communication, but only if the membership nonprofit corporation implements the measures specified in subsection (b).
(Act 2023-503, §1.)
(a) Except as otherwise provided in the certificate of incorporation or bylaws, any action that may be taken at any meeting of members may be taken without a meeting if the membership nonprofit corporation delivers notice that includes a ballot to every member entitled to vote on the matter.
(b) A ballot must:
(1) be in writing;
(2) set forth each proposed action;
(3) provide an opportunity to vote for, or withhold a vote for, each candidate for election as a director, if any; and
(4) provide an opportunity to vote for or against each other proposed action.
(c) Approval by ballot pursuant to this section of action other than election of directors is valid only when the number of votes cast by ballot equals or exceeds the quorum required to be present at a meeting authorizing the action, and the number of approvals equals or exceeds the number of votes that would be required to approve the matter at a meeting at which the total number of votes cast was the same as the number of votes cast by ballot.
(d) All solicitations for votes by ballot must:
(1) indicate the number of responses needed to meet the quorum requirements;
(2) state the percentage of approvals necessary to approve each matter other than election of directors; and
(3) specify the time by which a ballot must be received by the membership nonprofit corporation in order to be counted.
(e) Except as otherwise provided in the certificate of incorporation or bylaws, a ballot may not be revoked.
(Act 2023-503, §1.)
(a) After fixing a record date for a meeting, a membership nonprofit corporation shall prepare an alphabetical list of the names of all its members who are entitled to notice of and to vote at the members’ meeting. Each list must be arranged by voting group (and within each voting group by class) and contain the address of, and number and class of members and votes held by, each member, and if the notice or other communications regarding the meeting have been or will be sent by the membership nonprofit corporation to a member by electronic mail or other electronic transmission, the electronic mail or other electronic transmission address of that member.
(b) The list of members entitled to notice shall be available for inspection by any member no later than the tenth day before each meeting of members; provided, however, if the record date for determining the members entitled to vote is less than 10 days before the meeting date, the list shall reflect the members entitled to vote as of the tenth day before the meeting date. The list shall be available (i) at the membership nonprofit corporation’s principal office or at a place identified in the meeting notice in the city where the meeting will be held or (ii) on a reasonably accessible electronic network, provided that the information required to gain access to the list is provided with the notice of the meeting. In the event that the membership nonprofit corporation determines to make a list of members available on an electronic network, the membership nonprofit corporation may take reasonable steps to ensure that such information is available only to members of the membership nonprofit corporation. A member, or the member’s agent or attorney, is entitled on written demand to inspect and, subject to the requirements of Section 10A-3A-4.02(c), to copy a list of members, during regular business hours and at the member’s expense, during the period it is available for inspection. A membership nonprofit corporation may satisfy the member’s right to copy a list of members by furnishing a copy in the manner described in Section 10A-3A-4.03(b). A member and the member’s agent or attorney who inspects or is furnished a copy of a list of members under this subsection (b) or who copies the list under this subsection (b) may use the information on that list only for purposes related to the meeting and its subject matter and must keep the information on that list confidential.
(c) If the membership nonprofit corporation refuses to allow a member, or the member’s agent or attorney, to inspect a list of members before the meeting or any adjournment (or copy a list as permitted by subsection (b)), the designated court, and if none, the circuit court for the county in which the membership nonprofit corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the membership nonprofit corporation’s most recent registered office is located, on application of the member, may summarily order the inspection or copying at the membership nonprofit corporation’s expense and may postpone the meeting for which the list was prepared until the inspection or copying is complete.
(d) Refusal or failure to prepare or make available a list of members does not affect the validity of action taken at the meeting.
(e) Instead of making the list of members available as provided in subsection (b), a membership nonprofit corporation may state in a notice of meeting that the membership nonprofit corporation has elected to proceed under this subsection (e). If a membership nonprofit corporation has elected to proceed under this subsection (e), a member of that membership nonprofit corporation must state in that member’s demand for inspection a proper purpose for which inspection is demanded. Within three business days after receiving a demand under this subsection (e), the membership nonprofit corporation must deliver to the member making the demand an offer of a reasonable alternative method of achieving the purpose identified in the demand without providing access to or a copy of the list of members. An alternative method that reasonably and in a timely manner accomplishes the proper purpose set forth in the demand relieves the membership nonprofit corporation from making the list of members available under subsection (b), unless within a reasonable time after acceptance of the offer the membership nonprofit corporation fails to do the things it offered to do. Any rejection of the membership nonprofit corporation’s offer must be in writing and must indicate the reasons the alternative proposed by the membership nonprofit corporation does not meet the proper purpose of the demand.
(f) The record of members of the membership nonprofit corporation shall be prima facie evidence as to who are the members entitled to examine the members’ list or record of members to vote at any meeting of members.
(Act 2023-503, §1.)
The right of the members, or any class or classes of members, to vote may be limited, enlarged, or denied as provided in the membership nonprofit corporation’s certificate of incorporation or bylaws. Unless so limited, enlarged, or denied, each member, regardless of class, shall be entitled to one vote on each matter submitted to a vote of members.
(Act 2023-503, §1.)
(a) Except as otherwise provided in the certificate of incorporation or bylaws, a member may vote in person or by proxy.
(b) A member or the member’s agent or attorney-in-fact may appoint a proxy to vote or otherwise act for the member by signing an appointment form, or by an electronic transmission. An electronic transmission must contain or be accompanied by information from which the recipient can determine the date of the transmission and that the transmission was authorized by the sender or the sender’s agent or attorney-in-fact.
(c) An appointment of a proxy is effective when a signed appointment form or an electronic transmission of the appointment is received by the inspector of election or the officer or agent of the membership nonprofit corporation authorized to count votes. An appointment is valid for the term provided in the appointment form, and, if no term is provided, is valid for 11 months unless the appointment is irrevocable under subsection (d).
(d) An appointment of a proxy is revocable unless the appointment form or electronic transmission states that it is irrevocable and the appointment is coupled with an interest.
(e) The death or incapacity of the member appointing a proxy does not affect the right of the membership nonprofit corporation to accept the proxy’s authority unless notice of the death or incapacity is received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises authority under the appointment.
(f) An appointment made irrevocable under subsection (d) is revoked when the interest with which it is coupled is extinguished.
(g) Subject to Section 10A-3A-7.23 and to any express limitation on the proxy’s authority stated in the appointment form or electronic transmission, a membership nonprofit corporation is entitled to accept the proxy’s vote or other action as that of the member making the appointment.
(h) Nothing in this section shall be construed as limiting, or extending, authority granted under a durable power of attorney under Section 26-1-2 or Chapter 1A of Title 26, and any successor statute or statutes thereto.
(Act 2023-503, §1.)
(a) If the name signed on a vote, ballot, consent, waiver, member demand, or proxy appointment corresponds to the name of a member, the membership nonprofit corporation, if acting in good faith, is entitled to accept the vote, ballot, consent, waiver, member demand, or proxy appointment and give it effect as the act of the member.
(b) If the name signed on a vote, ballot, consent, waiver, member demand, or proxy appointment does not correspond to the name of its member, the membership nonprofit corporation, if acting in good faith, is nevertheless entitled to accept the vote, ballot, consent, waiver, member demand, or proxy appointment and give it effect as the act of the member if:
(1) the member is an entity and the name signed purports to be that of an officer or agent of the entity;
(2) the name signed purports to be that of an administrator, executor, guardian, or conservator representing the member and, if the membership nonprofit corporation requests, evidence of fiduciary status acceptable to the membership nonprofit corporation has been presented with respect to the vote, ballot, consent, waiver, member demand, or proxy appointment;
(3) the name signed purports to be that of a receiver or trustee in bankruptcy of the member and, if the membership nonprofit corporation requests, evidence of this status acceptable to the membership nonprofit corporation has been presented with respect to the vote, ballot, consent, waiver, member demand, or proxy appointment;
(4) the name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the member and, if the membership nonprofit corporation requests, evidence acceptable to the membership nonprofit corporation of the signatory’s authority to sign for the member has been presented with respect to the vote, ballot, consent, waiver, member demand, or proxy appointment; or
(5) two or more persons are the members as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all the co-owners.
(c) The membership nonprofit corporation is entitled to reject a vote, ballot, consent, waiver, member demand, or proxy appointment if the person authorized to accept or reject that instrument, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory’s authority to sign for the member.
(d) Neither the membership nonprofit corporation or any person authorized by it, nor an inspector of election appointed under Section 10A-3A-7.28, that accepts or rejects a vote, ballot, consent, waiver, member demand, or proxy appointment in good faith and in accordance with the standards of this Section 10A-3A-7.23 or Section 10A-3A-7.22(b) is liable in damages to the member for the consequences of the acceptance or rejection.
(e) Corporate action based on the acceptance or rejection of a vote, ballot, consent, waiver, member demand, or proxy appointment under this section is valid unless the designated court, and if none, the circuit court for the county in which the membership nonprofit corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the membership nonprofit corporation’s most recent registered office is located, determines otherwise.
(f) If an inspector of election has been appointed under Section 10A-2A-7.28, the inspector of election also has the authority to request information and make determinations under subsections (a), (b), and (c). Unless otherwise provided in the certificate of incorporation or bylaws, any determination made by the inspector of election under those subsections is controlling.
(Act 2023-503, §1.)
(a) Members entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those votes exists with respect to that matter. Except as provided in the certificate of incorporation or bylaws, members representing a majority of the votes entitled to be cast on the matter by the voting group constitutes a quorum of that voting group for action on that matter.
(b) Except as otherwise provided in the certificate of incorporation or bylaws, once a member is present or represented for any purpose at a meeting, the member is deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be fixed for that adjourned meeting.
(c) If a quorum exists, action on a matter (other than the election of directors) by a voting group is approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the certificate of incorporation or bylaws require a greater number of affirmative votes.
(d) An amendment of the certificate of incorporation or bylaws adding, changing, or deleting a quorum or voting requirement for a voting group greater than specified in subsection (a) or subsection (c) is governed by Section 10A-3A-7.26.
(e) If a meeting cannot be organized because a quorum is not present, those members present may adjourn the meeting to a time and place as they may determine. The certificate of incorporation or bylaws may provide that when a meeting that has been adjourned for lack of a quorum is reconvened, those members present, although less than a quorum as fixed in this section, the certificate of incorporation, or the bylaws, nonetheless constitute a quorum if the original notice of the meeting, or a notice of the adjourned meeting, states that those members who attend a meeting that has been adjourned for lack of a quorum will constitute a quorum even though they are less than a quorum.
(Act 2023-503, §1.)
(a) If this chapter, the certificate of incorporation, or the bylaws provide for voting by a single voting group on a matter, action on that matter is taken when voted upon by that voting group as provided in Section 10A-3A-7.24.
(b) If this chapter, the certificate of incorporation, or the bylaws provide for voting by two or more voting groups on a matter, action on that matter is taken only when voted upon by each of those voting groups counted separately as provided in Section 10A-3A-7.24. Action may be taken by different voting groups on a matter at different times.
(Act 2023-503, §1.)
(a) The certificate of incorporation or bylaws may provide for a higher or lower quorum or voting requirement for members (or voting groups of members) than is provided for by this chapter.
(b) An amendment to the certificate of incorporation or bylaws that adds, changes, or deletes a quorum or voting requirement must meet the same quorum requirement and be adopted by the same vote and voting groups required to take action under the quorum and voting requirements then in effect or proposed to be adopted, whichever is greater.
(Act 2023-503, §1.)
(a) Except as otherwise provided in the certificate of incorporation or bylaws, directors of a membership nonprofit corporation are elected by a plurality of the votes cast by the members entitled to vote in the election at a meeting at which a quorum is present.
(b) Members do not have a right to cumulate their votes for directors.
(Act 2023-503, §1.)
(a) A membership nonprofit corporation may appoint one or more inspectors to act at a meeting of members and make a written report thereof. The membership nonprofit corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of members, the person presiding at the meeting may appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of the inspector’s ability. The inspectors may appoint or retain other persons to assist the inspectors in the performance of the duties of inspector under subsection (b), and may rely on information provided by those persons and other persons, including those appointed to count votes, unless the inspectors believe reliance is unwarranted.
(b) The inspectors must:
(1) ascertain the number of members and their voting power;
(2) determine the number of votes represented at the meeting and the validity of proxies and ballots;
(3) count all votes;
(4) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors; and
(5) certify their determination of the number of votes represented at the meeting, and their count of all votes.
(c) No ballot, proxies, or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless the designated court, and if none, the circuit court for the county in which the membership nonprofits corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the membership nonprofit corporation’s most recent registered office is located, upon application by a member, shall determine otherwise.
(d) In performing their duties, the inspectors may examine:
(1) the proxy appointment forms and any other information provided in accordance with Section 10A-3A-7.22;
(2) any envelope or related writing submitted with those appointment forms;
(3) any ballots;
(4) any evidence or other information specified in Section 10A-3A-7.23; and
(5) the relevant books and records of the membership nonprofit corporation relating to its members and their entitlement to vote.
(e) The inspectors also may consider other information that they believe is relevant and reliable for the purpose of performing any of the duties assigned to them pursuant to subsection (b).
(f) An inspector and any person appointed by an inspector to assist with the inspector’s duties may, but need not, be a director, member, officer, or employee of the membership nonprofit corporation. A person who is a candidate for office to be filled at the meeting may not be an inspector or a person so appointed.
(Act 2023-503, §1.)
(a) Except as provided in the certificate of incorporation or bylaws, two or more members may provide for the manner in which they will vote by signing a written agreement for that purpose. A voting agreement is valid for the period provided in the agreement.
(b) A voting agreement created under this section is specifically enforceable, except that a voting agreement is not enforceable to the extent that enforcement of the agreement would violate the purposes of the membership nonprofit corporation.
(Act 2023-503, §1.)
All corporate powers shall be exercised by or under authority of, and the activities and affairs of a nonprofit corporation shall be managed by or under the direction and subject to the oversight of, the board of directors except as may be otherwise provided in this chapter or the certificate of incorporation. If the certificate of incorporation provides that some of the corporate powers are to be exercised by or under the authority of, or some of the activities and affairs of the nonprofit corporation are to be managed by or under the authority of, a person or group of persons other than the board of directors, then the powers and duties conferred or imposed upon the board of directors by this chapter with respect to those corporate powers, activities and affairs shall be exercised and performed by that person or group of persons as provided in the certificate of incorporation.
(Act 2023-503, §1.)
(a) The certificate of incorporation or bylaws may prescribe qualifications for directors or for nominees for directors. Qualifications must be reasonable as applied to the nonprofit corporation and be lawful. Qualifications may include not being or having been subject to specified criminal, civil, or regulatory sanctions or not having been removed as a director by judicial action or for cause.
(b) A director shall be a natural person of the age of at least 19 years but need not be a resident of this state or a member unless the certificate of incorporation or bylaws so prescribe.
(c) A qualification for nomination, election, or appointment for director prescribed before the earlier of a person’s nomination, election, or appointment shall apply to that person at the time of the earlier of that person’s nomination, election, or appointment and shall apply to that director during that director’s term. A qualification for nomination, election, or appointment for director prescribed after the earlier of a person’s nomination, election, or appointment shall not apply to that person with respect to that person’s nomination, election, or appointment and shall not apply to that director during that director’s term.
(d) A person who did not meet a qualification for nomination, election, or appointment, but who is elected or appointed as a director, may serve as a director until removed in accordance with Section 10A-3A-8.08 or 10A-3A-8.09.
(Act 2023-503, §1.)
(a) A board of directors shall consist of one or more individuals, with the number specified in or fixed in accordance with the certificate of incorporation or bylaws.
(b) The number of directors may be increased or decreased from time to time by amendment to, or in the manner provided in, the certificate of incorporation or bylaws.
(Act 2023-503, §1.)
(a) Except as set forth in Section 10A-3A-2.04, the directors of a membership nonprofit corporation are elected, appointed, or designated as provided in the certificate of incorporation or bylaws. If no method of election, appointment, or designation is set forth in the certificate of incorporation or bylaws, the directors of a membership nonprofit corporation are elected by the members entitled to vote at the time at the first annual meeting of members, and at each annual meeting thereafter.
(b) Except as set forth in Section 10A-3A-2.04, the directors of a nonmembership nonprofit corporation are elected, appointed, or designated as provided in the certificate of incorporation or bylaws. If no method of election, appointment, or designation is set forth in the certificate of incorporation or bylaws, the directors are elected by the board.
(c) If the certificate of incorporation or bylaws divide, or authorize dividing, the members into classes, the certificate of incorporation or bylaws may also authorize the election of all or a specified number of directors by one or more authorized classes of members. A class or multiple classes of members entitled to elect one or more directors is a separate voting group for purposes of the election of directors.
(Act 2023-503, §1.)
(a) The certificate of incorporation or bylaws may specify the terms of directors. If a term is not specified in the certificate of incorporation or bylaws, the term of a director is one year.
(b) A decrease in the number of directors or term of office does not shorten an incumbent director’s term.
(c) Except as provided in the certificate of incorporation or bylaws, the term of a director elected to fill a vacancy expires at the end of the unexpired term that the director is filling.
(d) Despite the expiration of a director’s term, the director continues to serve until the director’s successor is elected, appointed, or designated and until the director’s successor takes office unless otherwise provided in the certificate of incorporation or bylaws or there is a decrease in the number of directors.
(Act 2023-503, §1.)
The certificate of incorporation or bylaws may provide for staggering the terms of directors by dividing the total number of directors into groups of one or more directors. The terms of office and number of directors in each group do not need to be uniform.
(Act 2023-503, §1.)
(a) A director may resign at any time by delivering a written notice of resignation to the board of directors or its chair, to the secretary, or to the nonprofit corporation.
(b) A resignation is effective as provided in Section 10A-3A-1.03(i) unless the resignation provides for a delayed effectiveness, including effectiveness determined upon a future event or events.
(Act 2023-503, §1.)
(a) Except as provided in the certificate of incorporation or bylaws, a director of a membership nonprofit corporation may be removed with or without cause by the members who are eligible under Section 10A-3A-8.10 to vote to fill the vacancy created by the removal of that director.
(b) The notice of a meeting of members of a membership nonprofit corporation at which removal of a director is to be considered must state that the purpose, or one of the purposes, of the meeting is removal of the director.
(c) Except as provided in the certificate of incorporation or bylaws, the board of directors of a membership nonprofit corporation may not remove a director.
(d) Except as provided in the certificate of incorporation or bylaws, the board of directors may remove a director of a nonmembership nonprofit corporation with or without cause.
(e) In addition to the removal provisions of subsections (a) and (d), the board of directors of a membership nonprofit corporation or nonmembership nonprofit corporation may remove a director who:
(1) did not satisfy the qualifications for directors as set forth in the certificate of incorporation or bylaws at the time that director was nominated, elected, appointed, or designated to that director’s current term, if the decision that the director failed to satisfy a qualification is made by the vote of a majority of the directors who meet all of the required qualifications; or
(2) no longer satisfies the qualifications for directors as set forth in the certificate of incorporation or bylaws at the time that director was nominated, elected, appointed, or designated to that director’s current term, if the decision that the director failed to satisfy a qualification is made by the vote of a majority of the directors who meet all of the required qualifications.
(Act 2023-503, §1.)
The designated court, and if none, the circuit court for the county in which the nonprofit corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the nonprofit corporation’s most recent registered office is located may remove a director from office or may order other relief, including barring the director from reelection, redesignation, or reappointment for a period prescribed by the court, in a proceeding commenced by or in the right of the nonprofit corporation if the court finds that: (i) the director engaged in fraudulent conduct with respect to the nonprofit corporation or its members, grossly abused the position of director, or intentionally inflicted harm on the nonprofit corporation; and (ii) considering the director’s course of conduct and the inadequacy of other available remedies, removal or such other relief would be in the best interest of the nonprofit corporation.
(Act 2023-503, §1.)
(a) Except as otherwise provided in subsection (b), the certificate of incorporation, or the bylaws, if a vacancy occurs on the board of directors, including a vacancy resulting from an increase in the number of directors:
(1) the members may fill the vacancy;
(2) the board of directors may fill the vacancy; or
(3) if the directors remaining in office are less than a quorum, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office.
(b) Unless the certificate of incorporation or bylaws provides otherwise, if the vacant office was held by a director who is:
(1) elected by a voting group of members, only the members of that voting group are entitled to vote to fill the vacancy if it is filled by the members, and only the remaining directors elected by that voting group, even if less than a quorum, are entitled to fill the vacancy if it is filled by the directors;
(2) appointed by a person or group of persons specified in the certificate of incorporation, may be filled only by that person or that group of persons; or
(3) designated in the certificate of incorporation or bylaws, may only be filled as specified in the certificate of incorporation or bylaws.
(c) A vacancy that will occur at a specific later time (by reason of a resignation effective at a later time under Section 10A-3A-8.07(b) or otherwise) may be filled before the vacancy occurs but the new director may not take office until the vacancy occurs.
(Act 2023-503, §1.)
Unless the certificate of incorporation or bylaws provide otherwise, the board of directors may fix the compensation of directors.
(Act 2023-503, §1.)
(a) The board of directors may hold regular or special meetings in or out of the state.
(b) Unless restricted by the certificate of incorporation or bylaws, any or all directors may participate in a meeting of the board through the use of any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present in person at the meeting.
(Act 2023-503, §1.)
(a) Except to the extent that the certificate of incorporation or bylaws require that action by the board of directors be taken at a meeting, action required or permitted by this chapter to be taken by the board of directors may be taken without a meeting if each director signs a consent in a record describing the action to be taken and delivers it to the nonprofit corporation.
(b) Action taken under this section is the act of the board of directors when one or more consents signed by all the directors are delivered to the nonprofit corporation. Any director executing a consent may provide, whether through instruction to an agent or otherwise, that the consent will be effective at a future time, including a time determined upon the happening of an event, occurring not later than 60 days after the instruction is given or the provision is made, if evidence of the instruction or provision is provided to the nonprofit corporation. A director’s consent may be withdrawn by a revocation signed by the director and delivered to the nonprofit corporation before delivery to the nonprofit corporation of unrevoked consents signed by all the directors.
(c) A consent signed under this section has the effect of action taken at a meeting of the board of directors and may be described as such in any document.
(Act 2023-503, §1.)
(a) Unless the certificate of incorporation or bylaws provide otherwise, regular meetings of the board of directors may be held without notice of the place, if any, date, time, or purpose of the meeting.
(b) Unless the certificate of incorporation or bylaws provide for a longer or shorter period, special meetings of the board of directors must be preceded by at least two days’ notice of the place, if any, date, time, of the meeting. The notice need not describe the purpose of the special meeting unless required by the certificate of incorporation or bylaws.
(Act 2023-503, §1.)
(a) A director may waive any notice required by this chapter, the certificate of incorporation, or the bylaws before or after the date and time stated in the notice. Except as provided by subsection (b), the waiver must be in writing, signed by the director entitled to the notice, and delivered to the nonprofit corporation for filing by the nonprofit corporation with the minutes or corporate records.
(b) A director’s attendance at or participation in a meeting waives any required notice to the director of the meeting, unless the director at the beginning of the meeting (or promptly upon arrival) objects to holding the meeting or transacting business at the meeting and does not, after objecting, vote for or assent to action taken at the meeting.
(Act 2023-503, §1.)
(a) Unless the certificate of incorporation or bylaws provide for a greater or lesser number or unless otherwise expressly provided in this chapter, a quorum of a board of directors consists of a majority of the number of directors specified in or fixed in accordance with the certificate of incorporation or bylaws.
(b) The quorum of the board of directors specified in or fixed in accordance with the certificate of incorporation or bylaws may not consist of less than one-third of the specified or fixed number of directors.
(c) If a quorum is present when a vote is taken, the affirmative vote of a majority of directors present is the act of the board of directors unless the certificate of incorporation or bylaws require the vote of a greater number of directors or unless otherwise expressly provided in this chapter.
(d) A director who is present at a meeting of the board of directors or a committee when corporate action is taken is deemed to have assented to the action taken unless: (i) the director objects at the beginning of the meeting (or promptly upon arrival) to holding it or transacting business at the meeting; (ii) the dissent or abstention from the action taken is entered in the minutes of the meeting; or (iii) the director delivers written notice of the director’s dissent or abstention to the presiding officer of the meeting before its adjournment or to the nonprofit corporation immediately after adjournment of the meeting. The right of dissent or abstention is not available to a director who votes in favor of the action taken.
(Act 2023-503, §1.)
(a) A committee of the board of directors composed exclusively of one or more directors may be established to perform functions of the board:
(1) by the certificate of incorporation or bylaws; or
(2) except as restricted by the certificate of incorporation or bylaws, by the board of directors.
(b) Unless this chapter, the certificate of incorporation, or the bylaws provide otherwise, the establishment of a committee and appointment of directors to it must be approved by the greater of:
(1) a majority of all the directors in office when the action is taken; or
(2) the number of directors required by the certificate of incorporation or bylaws to take action under Section 10A-3A-8.24.
(c) Sections 10A-3A-8.20 through 10A-3A-8.24 apply to board committees and their members.
(d) A board committee may exercise the powers of the board of directors under Section 10A-3A-8.01, to the extent specified by the board of directors or in the certificate of incorporation or bylaws, except that a board committee may not:
(1) in the case of a membership nonprofit corporation, approve or propose to members action that this chapter requires be approved by members;
(2) remove a director from office;
(3) fill a vacancy on the board of directors; or, subject to subsection (e), on any committee of the board; or
(4) adopt, amend, or repeal a provision of the certificate of incorporation or bylaws.
(e) The board of directors may appoint one or more directors as alternate members of any board committee to replace any absent or disqualified member during the member’s absence or disqualification. If the certificate of incorporation, bylaws, or the action creating a board committee so provides, the member or members present at any board committee meeting and not disqualified from voting may, by unanimous action, appoint another director to act in place of an absent or disqualified member during that member’s absence or disqualification.
(f) The certificate of incorporation, bylaws, or board of directors may create or authorize the creation of one or more advisory committees whose members need not be directors. An advisory committee:
(1) is not a committee of the board; and
(2) may not exercise any of the powers of the board.
(Act 2023-503, §1.)
(a) Whenever this chapter expressly requires the board of directors to approve or take other action with respect to any agreement, instrument, plan, or document, such agreement, instrument, plan, or document may be approved by the board of directors in final form or in substantially final form. Substantially final form means that all of the material terms are set forth in the agreement, instrument, plan, or document, or are determinable through other information or materials presented to or known by the board of directors, or are determinable by a combination thereof, except as otherwise described in subsection (c).
(b) If the board of directors shall have acted to approve or take other action with respect to an agreement, instrument, plan, or document that is expressly required by this chapter to be approved by the board of directors, the board of directors may, but is not required to, at any time after providing the approval or taking such other action adopt a resolution ratifying the agreement, instrument, plan, or document, and the ratification shall be deemed to be effective as of the time of the original approval or other action by the board of directors and to satisfy any requirement under this chapter that the board of directors approve or take other action with respect to the agreement, instrument, plan, or document in a specific manner or sequence.
(c) At the time of the approval of any agreement, instrument, plan, or document by the board of directors, the agreement, instrument, plan, or document is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the agreement, instrument, plan, or document that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the agreement, instrument, plan, or document.
(Act 2025-281, §8; Act 2026-495, §1.)
Division C of Article 3 of Chapter 1 shall not apply to this chapter. Instead:
(a) Each member of the board of directors, when discharging the duties of a director, shall act: (i) in good faith, and (ii) in a manner the director reasonably believes to be in the best interests of the nonprofit corporation.
(b) The members of the board of directors or a board committee, when becoming informed in connection with their decision-making function or devoting attention to their oversight function, shall discharge their duties with the care that a person in a like position would reasonably believe appropriate under similar circumstances.
(c) In discharging board of directors or board committee duties, a director shall disclose, or cause to be disclosed, to the other board of directors or board committee members information not already known by them but known by the director to be material to the discharge of their decision-making or oversight functions, except that disclosure is not required to the extent that the director reasonably believes that doing so would violate a duty imposed under law, a legally enforceable obligation of confidentiality, or a professional ethics rule.
(d) In discharging board of directors or board committee duties, a director who does not have knowledge that makes reliance unwarranted is entitled to rely on the performance by any of the persons specified in subsection (f)(1) or subsection (f)(3) to whom the board of directors may have delegated, formally or informally by course of conduct, the authority or duty to perform one or more of the board of directors’ functions that are delegable under applicable law.
(e) In discharging board of directors or board committee duties, a director who does not have knowledge that makes reliance unwarranted is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, prepared or presented by any of the persons specified in subsection (f).
(f) A director is entitled to rely, in accordance with subsection (d) or (e), on:
(1) one or more officers, employees, or volunteers of the nonprofit corporation or one or more persons associated with the nonprofit corporation, whom the director reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports, or statements provided;
(2) legal counsel, public accountants, or other persons retained by the nonprofit corporation as to matters involving skills or expertise the director reasonably believes are matters (i) within the particular person’s professional or expert competence, or (ii) as to which the particular person merits confidence; or
(3) a board committee of which the director is not a member if the director reasonably believes the committee merits confidence.
(g) Except as set forth in subsections (a) and (b), a director, when discharging the duties of a director, has no duty to any person other than the nonprofit corporation.
(Act 2023-503, §1.)
Division C of Article 3 of Chapter 1 shall not apply to this chapter. Instead:
(a) A director shall not be liable to the nonprofit corporation or its members for any decision to take or not to take action, or any failure to take any action, as a director, unless the party asserting liability in a proceeding establishes that:
(1) no defense interposed by the director based on: (i) any provision in the certificate of incorporation authorized by Section 10A-3A-2.02(b)(4) or by Section 10A-3A-2.02(b)(6), or (ii) the protection afforded by Section 10A-3A-8.60, precludes liability; and
(2) the challenged conduct consisted or was the result of:
(i) action not in good faith; or
(ii) a decision:
(A) which the director did not reasonably believe to be in the best interests of the nonprofit corporation, or
(B) as to which the director was not informed to an extent the director reasonably believed appropriate in the circumstances; or
(iii) a lack of objectivity due to the director’s familial, financial or business relationship with, or a lack of independence due to the director’s domination or control by, another person having a material interest in the challenged conduct:
(A) which relationship or which domination or control could reasonably be expected to have affected the director’s judgment respecting the challenged conduct in a manner adverse to the nonprofit corporation, and
(B) after a reasonable expectation to that effect has been established, the director shall not have established that the challenged conduct was reasonably believed by the director to be in the best interests of the nonprofit corporation; or
(iv) a sustained failure of the director to devote attention to ongoing oversight of the activities and affairs of the nonprofit corporation, or a failure to devote timely attention, by making (or causing to be made) appropriate inquiry, when particular facts and circumstances of significant concern materialize that would alert a reasonably attentive director to the need for that inquiry; or
(v) receipt of a financial benefit to which the director was not entitled or any other breach of the director’s duties to deal fairly with the nonprofit corporation and its members that is actionable under applicable law.
(b) The party seeking to hold the director liable:
(1) for money damages, shall also have the burden of establishing that:
(i) harm to the nonprofit corporation or its members has been suffered, and
(ii) the harm suffered was proximately caused by the director’s challenged conduct; or
(2) for other money payment under a legal remedy, such as compensation for the unauthorized use of corporate assets, shall also have whatever persuasion burden may be called for to establish that the payment sought is appropriate in the circumstances; or
(3) for other money payment under an equitable remedy, such as profit recovery by or disgorgement to the nonprofit corporation, shall also have whatever persuasion burden may be called for to establish that the equitable remedy sought is appropriate in the circumstances.
(c) Nothing contained in this section shall:
(1) in any instance where fairness is at issue alter the burden of proving the fact or lack of fairness otherwise applicable;
(2) alter the fact or lack of liability of a director under another section of this chapter, such as the provisions governing the consequences of an unlawful distribution under Section 10A-3A-8.32 or a transactional interest under Section 10A-3A-8.60;
(3) affect any rights to which a director may be entitled under another statute of this state or the United States; or
(4) affect any rights to which the nonprofit corporation or a member may be entitled under another statute of this state or the United States.
(Act 2023-503, §1.)
(a) A director who votes for or assents to a distribution in excess of what may be authorized and made pursuant to Section 10A-3A-6.40 or Section 10A-3A-11.07 is personally liable to the nonprofit corporation for the amount of the distribution that exceeds what could have been distributed without violating Section 10A-3A-6.40 or Section 10A-3A-11.07 if the party asserting liability establishes that when taking the action the director did not comply with Section 10A-3A-8.30.
(b) A director held liable under subsection (a) for an unlawful distribution is entitled to:
(1) contribution from every other director who could be held liable under subsection (a) for the unlawful distribution; and
(2) recoupment from each person of the pro-rata portion of the amount of the unlawful distribution the person received, whether or not the person knew the distribution was made in violation of Section 10A-3A-6.40 or Section 10A-3A-11.07.
(c) A proceeding to enforce:
(1) the liability of a director under subsection (a) is barred unless it is commenced within two years after the date on which the distribution was made; or
(2) contribution or recoupment under subsection (b) is barred unless it is commenced within one year after the liability of the claimant has been finally adjudicated under subsection (a).
(Act 2023-503, §1.)
(a) A nonprofit corporation may not lend money to or guarantee the obligation of a director or officer of the nonprofit corporation.
(b) The fact that a loan or guarantee is made in violation of this section does not affect the borrower’s liability on the loan.
(Act 2023-503, §1.)
(a) A nonprofit corporation has the officers described in its certificate of incorporation or bylaws or appointed by the board of directors in accordance with the certificate of incorporation or bylaws.
(b) The board of directors may elect individuals to fill one or more offices of the nonprofit corporation.
(c) The certificate of incorporation, bylaws, or the board of directors shall assign to an officer responsibility for maintaining and authenticating the records of the nonprofit corporation required to be kept under Section 10A-3A-4.01.
(d) Unless the certificate of incorporation or bylaws provide otherwise, the same individual may simultaneously hold more than one office in a nonprofit corporation.
(Act 2023-503, §1.)
Each officer has the authority and shall perform the functions set forth in the certificate of incorporation or bylaws or, to the extent consistent with the certificate of incorporation or bylaws, the functions prescribed by the board of directors or by direction of an officer authorized by the board of directors to prescribe the functions of other officers.
(Act 2023-503, §1.)
Division C of Article 3 of Chapter 1 shall not apply to this chapter. Instead:
(a) An officer, when performing in that capacity, has the duty to act:
(1) in good faith;
(2) with the care that a person in a like position would reasonably exercise under similar circumstances; and
(3) in a manner the officer reasonably believes to be in the best interests of the nonprofit corporation.
(b) The duty of an officer includes the obligation:
(1) to inform the superior officer to whom, or the board of directors or the board committee to which, the officer reports of information about the affairs of the nonprofit corporation known to the officer, within the scope of the officer’s functions, and known to the officer to be material to the superior officer, board of directors, or board committee; and
(2) to inform the officer’s superior officer, or another appropriate person within the nonprofit corporation, or the board of directors, or a board committee, of any actual or probable material violation of law involving the nonprofit corporation or material breach of duty to the nonprofit corporation by an officer, employee, or agent of the nonprofit corporation, that the officer believes has occurred or is likely to occur.
(c) In discharging the officer’s duties, an officer who does not have knowledge that makes reliance unwarranted is entitled to rely on:
(1) the performance of properly delegated responsibilities by one or more employees, one or more volunteers of the nonprofit corporation, or one or more other persons associated with the nonprofit corporation, to whom that officer has delegated responsibilities and whom the officer reasonably believes to be reliable and competent in performing the responsibilities delegated;
(2) information, opinions, reports, or statements, including financial statements and other financial data, prepared or presented by one or more officers or employees, one or more volunteers of the nonprofit corporation, or one or more other persons associated with the nonprofit corporation, whom the officer reasonably believes to be reliable and competent in the matters presented, or legal counsel, public accountants, or other persons retained by the nonprofit corporation as to matters involving skills or expertise the officer reasonably believes are matters: (i) within the particular person’s professional or expert competence, or (ii) as to which the particular person merits confidence; or
(3) volunteers of the nonprofit corporation or one or more persons associated with the nonprofit corporation.
(d) An officer is not liable to the nonprofit corporation or its members for any decision to take or not to take action, or any failure to take any action, as an officer, if the duties of the office are performed in compliance with this section. Whether an officer who does not comply with this section shall have liability will depend in such instance on applicable law, including those principles of Section 10A-3A-8.31 that have relevance.
(Act 2023-503, §1.)
Division C of Article 3 of Chapter 1 shall not apply to this chapter. Instead:
(a) An officer may resign at any time by delivering a written notice to the board of directors, its chair, the appointing officer, the secretary, or the nonprofit corporation. A resignation is effective as provided in Section 10A-3A-1.03 unless the notice provides for a delayed effectiveness, including effectiveness determined upon a future event or events. If effectiveness of a resignation is stated to be delayed and the board of directors or the appointing officer accepts the delay, the board of directors or the appointing officer may fill the pending vacancy before the delayed effectiveness, but the new officer may not take office until the vacancy occurs.
(b) An officer may be removed at any time with or without cause by (i) the board of directors; (ii) the appointing officer, unless the certificate of incorporation, bylaws, or the board of directors provide otherwise; or (iii) any other officer if authorized by the certificate of incorporation, bylaws, or the board of directors.
(c) In this section, “appointing officer” means the officer (including any successor to that officer) who appointed the officer resigning or being removed.
(Act 2023-503, §1.)
(a) The election or appointment of an officer does not itself create contract rights.
(b) An officer’s removal does not affect the officer’s contract rights, if any, with the nonprofit corporation. An officer’s resignation does not affect the nonprofit corporation’s contract rights, if any, with the officer.
(Act 2023-503, §1.)
In this division:
(1) “DIRECTOR” or “OFFICER” means an individual who is or was a director or officer, respectively, of a nonprofit corporation or who, while a director or officer of the nonprofit corporation, is or was serving at the nonprofit corporation’s request as a director, officer, manager, member, partner, trustee, employee, or agent of another entity or employee benefit plan. A director or officer is considered to be serving an employee benefit plan at the nonprofit corporation’s request if the individual’s duties to the nonprofit corporation also impose duties on, or otherwise involve services by, the individual to the plan or to participants in or beneficiaries of the plan. “Director” or “officer” includes, unless the context requires otherwise (i) the estate or personal representative of a director or officer and (ii) with respect to a director, an individual designated, elected, or appointed by that or any other name or title.
(2) “LIABILITY” means the obligation to pay a judgment, settlement, penalty, fine (including an excise tax assessed with respect to an employee benefit plan), or expenses incurred with respect to a proceeding.
(3) “NONPROFIT CORPORATION” includes any domestic or foreign predecessor entity of a nonprofit corporation.
(4) “OFFICIAL CAPACITY” means: (i) when used with respect to a director, the office of director in a nonprofit corporation; and (ii) when used with respect to an officer, as contemplated in Section 10A-3A-8.56, the office in a nonprofit corporation held by the officer. “Official capacity” does not include service for any other corporation or foreign corporation or any joint venture, trust, employee benefit plan, or other entity.
(5) “PARTY” means an individual who was, is, or is threatened to be made, a defendant or respondent in a proceeding.
(6) “PROCEEDING” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, arbitrative, or investigative and whether formal or informal.
(Act 2023-503, §1.)
(a) Except as otherwise provided in this section, a nonprofit corporation may indemnify an individual who is a party to a proceeding because the individual is a director against liability incurred in the proceeding if:
(1)(i) the director conducted himself or herself in good faith; and
(ii) the director reasonably believed:
(A) in the case of conduct in an official capacity, that his or her conduct was in the best interests of the nonprofit corporation; and
(B) in all other cases, that the director’s conduct was at least not opposed to the best interests of the nonprofit corporation; and
(iii) in the case of any criminal proceeding, the director had no reasonable cause to believe his or her conduct was unlawful; or
(2) the director engaged in conduct for which broader indemnification has been made permissible or obligatory under a provision of the certificate of incorporation (as authorized by Section 10A-3A-2.02).
(b) A director’s conduct with respect to an employee benefit plan for a purpose the director reasonably believed to be in the interests of the participants in, and the beneficiaries of, the plan is conduct that satisfies the requirement of subsection (a)(1)(ii)(B).
(c) The termination of a proceeding by judgment, order, settlement, or conviction, or upon a plea of nolo contendere or its equivalent, is not, of itself, determinative that the director did not meet the relevant standard of conduct described in this section.
(d) Unless ordered by a court under Section 10A-3A-8.54(a)(3), a nonprofit corporation may not indemnify a director:
(1) in connection with a proceeding by the nonprofit corporation, except for expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard of conduct under subsection (a); or
(2) in connection with any proceeding with respect to conduct for which the director was adjudged liable on the basis of receiving a financial benefit to which the director was not entitled, regardless of whether it involved action in the director’s official capacity.
(Act 2023-503, §1.)
A nonprofit corporation may provide in its certificate of incorporation or bylaws that the nonprofit corporation shall indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director was a party because the director was a director of the nonprofit corporation against expenses incurred by the director in connection with the proceeding.
(Act 2023-503, §1.)
(a) A nonprofit corporation may, before final disposition of a proceeding, advance funds to pay for or reimburse expenses incurred in connection with the proceeding by an individual who is a party to the proceeding because that individual is a director if the director delivers to the nonprofit corporation a signed written undertaking of the director to repay any funds advanced if (i) the director is not entitled to mandatory indemnification under Section 10A-3A-8.52 and (ii) it is ultimately determined under Section 10A-3A-8.54 or Section 10A-3A-8.55 that the director is not entitled to indemnification.
(b) The undertaking required by subsection (a) must be an unlimited general obligation of the director but need not be secured and may be accepted without reference to the financial ability of the director to make repayment.
(c) Authorizations under this section shall be made:
(1) by the board of directors:
(i) if there are two or more qualified directors, by a majority vote of all the qualified directors (a majority of whom shall for that purpose constitute a quorum) or by a majority of the members of a committee consisting solely of two or more qualified directors appointed by a majority vote of qualified directors; or
(ii) if there are fewer than two qualified directors, by the vote necessary for action by the board of directors in accordance with Section 10A-3A-8.24(c), in which authorization directors who are not qualified directors may participate; or
(2) by the members, but membership interests owned by or voted under the control of a director who at the time is not a qualified director may not be voted on the authorization.
(Act 2023-503, §1.)
(a) A director who is a party to a proceeding because he or she is a director may apply for indemnification or an advance for expenses to the court conducting the proceeding or to another court of competent jurisdiction. After receipt of an application and after giving any notice it considers necessary, the court shall:
(1) order indemnification if the court determines that the director is entitled to indemnification pursuant to a provision authorized by Section 10A-3A-8.52;
(2) order indemnification or advance for expenses if the court determines that the director is entitled to indemnification or advance for expenses pursuant to a provision authorized by Section 10A-3A-8.58(a); or
(3) order indemnification or advance for expenses if the court determines, in view of all the relevant circumstances, that it is fair and reasonable: (i) to indemnify the director, or (ii) to advance expenses to the director, even if, in the case of (i) or (ii), the director has not met the relevant standard of conduct set forth in Section 10A-3A-8.51(a), failed to comply with Section 10A-3A-8.53, or was adjudged liable in a proceeding referred to in Section 10A-3A-8.51(d)(1) or Section 10A-3A-8.51(d)(2), but if the director was adjudged so liable indemnification shall be limited to expenses incurred in connection with the proceeding.
(b) If the court determines that the director is entitled to indemnification under subsection (a)(1) or to indemnification or advance for expenses under subsection (a)(2), it shall also order the nonprofit corporation to pay the director’s expenses incurred in connection with obtaining court-ordered indemnification or advance for expenses. If the court determines that the director is entitled to indemnification or advance for expenses under subsection (a)(3), it may also order the nonprofit corporation to pay the director’s expenses to obtain court-ordered indemnification or advance for expenses.
(Act 2023-503, §1.)
(a) A nonprofit corporation may not indemnify a director under Section 10A-3A-8.51 unless authorized for a specific proceeding after a determination has been made that indemnification is permissible because the director has met the relevant standard of conduct set forth in Section 10A-3A-8.51.
(b) The determination shall be made:
(1) if there are two or more qualified directors, by the board of directors by a majority vote of all the qualified directors (a majority of whom shall for that purpose constitute a quorum), or by a majority of the members of a committee of two or more qualified directors appointed by a majority vote of qualified directors;
(2) by special legal counsel:
(i) selected in the manner prescribed in subsection (b)(1); or
(ii) if there are fewer than two qualified directors, selected by the board of directors (in which selection directors who are not qualified directors may participate); or
(3) by the members, but membership interests owned by or voted under the control of a director who at the time is not a qualified director may not be voted on the determination.
(c) Authorization of indemnification shall be made in the same manner as the determination that indemnification is permissible except that if there are fewer than two qualified directors, or if the determination is made by special legal counsel, authorization of indemnification shall be made by those entitled to select special legal counsel under subsection (b)(2)(ii).
(Act 2023-503, §1.)
(a) A nonprofit corporation may indemnify and advance expenses under this Division E of this Article 8 to an officer who is a party to a proceeding because he or she is an officer:
(1) to the same extent as a director; and
(2) if he or she is an officer but not a director, to such further extent as may be provided by the certificate of incorporation or the bylaws, or by a resolution adopted or a contract approved by the board of directors or members except for
(i) liability in connection with a proceeding by the nonprofit corporation other than for expenses incurred in connection with the proceeding, or
(ii) liability arising out of conduct that constitutes
(A) receipt by the officer of a financial benefit to which the officer is not entitled,
(B) an intentional infliction of harm on the nonprofit corporation or the members, or
(C) an intentional violation of criminal law.
(b) Subsection (a)(2) shall apply to an officer who is also a director if the person is made a party to the proceeding based on an act or omission solely as an officer.
(c) An officer who is not a director is entitled to indemnification under Section 10A-3A-8.52 if the certificate of incorporation or bylaws of the nonprofit corporation allows for such indemnification, and may apply to a court under Section 10A-3A-8.54 for indemnification or an advance for expenses, in each case to the same extent to which a director may be entitled to indemnification or advance for expenses under those sections, unless otherwise provided in the certificate of incorporation or bylaws.
(Act 2023-503, §1.)
A nonprofit corporation may purchase and maintain insurance on behalf of an individual who is a director or officer of the nonprofit corporation, or who, while a director or officer of the nonprofit corporation, serves at the nonprofit corporation’s request as a director, officer, partner, trustee, employee, or agent of another corporation or foreign corporation or a joint venture, trust, employee benefit plan, or other entity, against liability asserted against or incurred by the individual in that capacity or arising from the individual’s status as a director or officer, regardless of whether the nonprofit corporation would have power to indemnify or advance expenses to the individual against the same liability under this Division E of this Article 8.
(Act 2023-503, §1.)
(a) A nonprofit corporation may, by a provision in its certificate of incorporation, bylaws, or in a resolution adopted or a contract approved by the board of directors or members, obligate itself in advance of the act or omission giving rise to a proceeding to provide indemnification in accordance with Section 10A-3A-8.51 or advance funds to pay for or reimburse expenses in accordance with Section 10A-3A-8.53. Any obligatory provision shall be deemed to satisfy the requirements for authorization referred to in Section 10A-3A-8.53(c) and in Section 10A-3A-8.55(c). Any provision that obligates the nonprofit corporation to provide indemnification to the fullest extent permitted by law shall be deemed to obligate the nonprofit corporation to advance funds to pay for or reimburse expenses in accordance with Section 10A-3A-8.53 to the fullest extent permitted by law, unless the provision expressly provides otherwise.
(b) A right of indemnification or to advances for expenses created by this Division E of this Article 8 or under subsection (a) and in effect at the time of an act or omission shall not be eliminated or impaired with respect to the act or omission by an amendment of the certificate of incorporation, bylaws, or a resolution of the board of directors or members, adopted after the occurrence of the act or omission, unless, in the case of a right created under subsection (a), the provision creating the right and in effect at the time of the act or omission explicitly authorizes elimination or impairment after the act or omission has occurred.
(c) Any provision pursuant to subsection (a) shall not obligate the nonprofit corporation to indemnify or advance expenses to a director of a predecessor of the nonprofit corporation, pertaining to conduct with respect to the predecessor, unless otherwise expressly provided. Any provision for indemnification or advance for expenses in the certificate of incorporation, bylaws, or a resolution of the board of directors or other similar governing authority of a predecessor of the nonprofit corporation in a merger or in a contract to which the predecessor is a party, existing at the time the merger takes effect, shall be governed by Section 10A-3A-12.06(a)(4).
(d) Subject to subsection (b), a nonprofit corporation may, by a provision in its certificate of incorporation, limit any of the rights to indemnification or advance for expenses created by or pursuant to this Division E of this Article 8.
(e) This Division E of this Article 8 does not limit a nonprofit corporation’s power to pay or reimburse expenses incurred by a director or an officer in connection with appearing as a witness in a proceeding at a time when the director or officer is not a party.
(f) This Division E of this Article 8 does not limit a nonprofit corporation’s power to indemnify, advance expenses to or provide or maintain insurance on behalf of an employee, agent, or volunteer.
(Act 2023-503, §1.)
A nonprofit corporation may provide indemnification or advance expenses to a director or an officer only as permitted by this Division E of this Article 8.
(Act 2023-503, §1.)
As used in this chapter, unless otherwise specified or unless the context otherwise requires, the following terms shall mean:
(a) CONFLICTING INTEREST TRANSACTION means an act or transaction effected or proposed to be effected by the nonprofit corporation (or by an entity controlled by the nonprofit corporation):
(1) to which, at the relevant time, a director or officer is a party;
(2) respecting which, at the relevant time, the director or officer had knowledge and a material financial interest known to the director or officer; or
(3) respecting which, at the relevant time, the director or officer knew that a related person was a party or had a material financial interest.
(b) CONTROL or CONTROLLED BY means (i) having the power, directly or indirectly, to elect or remove a majority of the members of the board of directors or other governing authority of an entity, whether through the ownership of voting shares or interests, by contract, or otherwise or (ii) being subject to a majority of the risk of loss from the entity’s activities or entitled to receive a majority of the entity’s residual returns.
(c) CONTROL GROUP means two or more persons that, by virtue of an agreement, arrangement, or understanding between or among those persons, constitute a controlling person.
(d) CONTROLLING PERSON means any person that, together with (i) any related person; and (ii) any person that controls, is controlled by, or is under common control with that person:
(1) With respect to a membership nonprofit corporation:
(i) owns or controls a majority in voting power of the outstanding membership interests entitled to vote generally in the election of directors or in the election of directors who have a majority in voting power of the votes of all directors on the board of directors;
(ii) has the right, by contract or otherwise, to cause the election of nominees who are selected at the discretion of that person and who constitute either a majority of the members of the board of directors of a membership nonprofit corporation or directors entitled to cast a majority in voting power of the votes of all directors on the board of directors of a membership nonprofit corporation;
(iii) has the power functionally equivalent to that of a member that owns or controls a majority in voting power of the outstanding membership interests entitled to vote generally in the election of directors by virtue of ownership or control of at least one-third in voting power of the outstanding membership interests entitled to vote generally in the election of directors or in the election of directors who have a majority in voting power of the votes of all directors on the board of directors and the power to exercise managerial authority over the business and affairs of the membership nonprofit corporation; or
(iv) either (A) has the power and authority to exercise and perform certain corporate powers, activities and affairs pursuant to a provision in the certificate of incorporation permitted by Section 10A-3A-8.01 or (B) has the right to approve certain matters as permitted by Section 10A-3A-2.02(b)(2)(ix).
(2) With respect to a nonmembership nonprofit corporation:
(i) has the right, by contract or otherwise, to cause the election of nominees who are selected at the discretion of that person and who constitute either a majority of the members of the board of directors of a nonmembership nonprofit corporation or directors entitled to cast a majority in voting power of the votes of all directors on the board of directors of a nonmembership nonprofit corporation; or
(ii) either (A) has the power and authority to exercise and perform certain corporate powers, activities, and affairs pursuant to a provision in the certificate of incorporation permitted by Section 10A-3A-8.01 or (B) has the right to approve certain matters as permitted by Section 10A-3A-2.02(b)(2)(ix).
(e) CONTROLLING PERSON TRANSACTION means an act or transaction between the nonprofit corporation or one or more of its subsidiaries, on the one hand, and a controlling person or a control group, on the other hand, or an act or transaction from which a controlling person or a control group receives a material financial interest.
(f) DISINTERESTED PERSON means any member or other person that does not have a material financial interest in the act or transaction at issue or, if applicable, a material relationship with the controlling person or other member of the control group, or any other person that has a material financial interest in the act or transaction.
(g) FAIR TO THE NONPROFIT CORPORATION means the act or transaction at issue, as a whole, is beneficial to the nonprofit corporation or its members, if any, in their capacity as members, given the consideration paid to or received by the nonprofit corporation or its members or other benefit conferred on the nonprofit corporation or its members, if any, and taking into appropriate account whether the act or transaction meets both of the following: (i) it is fair in terms of the director’s, officer’s, controlling person’s, or control group’s dealings with the nonprofit corporation, as the case may be; and (ii) it is comparable to what might have been obtainable in an arm’s length transaction available to the nonprofit corporation.
(h) MATERIAL FINANCIAL INTEREST means a nonspeculative financial interest in an act or transaction, other than one that would devolve on the nonprofit corporation or the members generally, that would reasonably be expected to impair the objectivity of the director’s or officer’s judgment when participating in the negotiation, authorization, or approval of the act or transaction at issue.
(i) MATERIAL RELATIONSHIP has the meaning set forth in Section 10A-3A-1.60.
(j) QUALIFIED DIRECTOR has the meaning set forth in Section 10A-3A-1.60.
(k) RELATED PERSON has the meaning set forth in Section 10A-3A-2.02.
(l) RELEVANT TIME means (i) the time at which directors’ action respecting the act or transaction is taken in compliance with Sections 10A-3A-8.61(c) or 10A-3A-8.62(c) or (ii) if the act or transaction is not brought before the board of directors (or a committee) for action under Section 10A-3A-8.61(d), at the time the nonprofit corporation (or an entity controlled by the nonprofit corporation) becomes legally obligated to consummate the act or transaction.
(m) REQUIRED DISCLOSURE means disclosure of (i) the existence and nature of the director’s or officer’s conflicting interest and (ii) all facts known to the director or officer respecting the subject matter of the act or transaction that a qualified director would reasonably believe to be material in deciding whether to proceed with the act or transaction.
(Act 2023-503, §1; Act 2026-495, §1.)
(a) An act or transaction effected or proposed to be effected by a membership nonprofit corporation (or by an entity controlled by the membership nonprofit corporation) may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a director or officer of the membership nonprofit corporation, on the grounds that the director or officer has an interest respecting the act or transaction, if the act or transaction is not a conflicting interest transaction.
(b) A conflicting interest transaction may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a director or officer of the membership nonprofit corporation, in a proceeding by a member, on the grounds that the director or officer has an interest respecting the conflicting interest transaction, if:
(1) the directors’ action respecting the act or transaction was taken in compliance with subsection (c) at any time; or
(2) the members’ action respecting the act or transaction was taken in compliance with subsection (d) at any time; or
(3) the act or transaction is at the relevant time fair to the membership nonprofit corporation.
(c)(1) Directors’ action respecting a conflicting interest transaction is effective for purposes of subsection (b)(1) if the conflicting interest transaction has been authorized, after required disclosure by the conflicted director or officer of information not already known by the qualified directors, or after modified disclosure in compliance with subsection (c)(2), by (A) the affirmative vote of a majority (but no fewer than two) of the qualified directors who voted on the conflicting interest transaction or (B) the affirmative vote of a majority of the members of a board committee that is composed of only qualified directors (but no fewer than two). Directors’ action respecting a conflicting interest transaction is effective even though the conflicted director or officer is present at or participates in the meeting of the board or committee which authorizes the act or transaction or was involved in the initiation, negotiation, or approval of the act or transaction.
(2) Notwithstanding subsection (c)(1), when a transaction is a conflicting interest transaction only because a related person described in clause (v) or (vi) of the definition of “related person” in Section 10A-3A-2.02 is a party to or has a material financial interest in the conflicting interest transaction, the conflicted director or officer is not obligated to make required disclosure to the extent that the director or officer reasonably believes that doing so would violate a duty imposed under law, a legally enforceable obligation of confidentiality, or a professional ethics rule, provided that the conflicted director or officer discloses to the qualified directors voting on the conflicting interest transaction:
(i) all information required to be disclosed that is not so violative;
(ii) the existence and nature of the director’s or officer’s conflicting interest; and
(iii) the nature of the conflicted director’s or officer’s duty not to disclose the confidential information.
(3) A majority (but no fewer than two) of all the qualified directors on the board of directors, or on the board committee, constitutes a quorum for purposes of action that complies with this section.
(4) Where directors’ action under this subsection (c) does not satisfy a quorum or voting requirement applicable to the authorization of the conflicting interest transaction by reason of the certificate of incorporation, bylaws, or another provision of this chapter, independent action to satisfy those authorization requirements shall be taken by the board of directors or a board committee, in which action directors who are not qualified directors may participate.
(5) Where directors’ action under this subsection (c) is taken without a meeting in accordance with Section 10A-3A-8.21, the action is effective even though a conflicted director signs a consent to that action.
(d)(1) Members’ action respecting a conflicting interest transaction is effective for purposes of subsection (b)(2) if a majority of the votes cast by the holders of all qualified membership interests are in favor of the conflicting interest transaction after (i) notice to members describing the action to be taken respecting the conflicting interest transaction; (ii) provision to the membership nonprofit corporation of the information referred to in subsection (d)(2); and (iii) communication to the members entitled to vote on the conflicting interest transaction of the information that is the subject of required disclosure, to the extent the information is not already known by them. In the case of members’ action at a meeting, the members entitled to vote shall be determined as of the record date for notice of the meeting.
(2) A director or officer who has a conflicting interest respecting the conflicting interest transaction shall, before the members’ vote, inform the secretary or other officer or agent of the membership nonprofit corporation authorized to tabulate votes, in writing, of the number of membership interests that the director or officer knows are not qualified membership interests under subsection (d)(3), and the identity of the holders of those membership interests.
(3) For purposes of this section: (i) “holder” means and “held by” refers to membership interests held by a member; and (ii) “qualified membership interests” means all membership interests entitled to be voted with respect to the conflicting interest transaction except for membership interests that the secretary or other officer or agent of the membership nonprofit corporation authorized to tabulate votes either knows, or under subsection (d)(2) is notified, are held by (A) a director or officer who has a conflicting interest respecting the conflicting interest transaction or (B) a related person of the director or officer (excluding a person described in clause (vi) of the definition of “related person” in Section 10A-3A-2.02).
(4) A majority of the votes entitled to be cast by the holders of all qualified membership interests constitutes a quorum for purposes of compliance with this section. Members’ action that otherwise complies with this section is not affected by the presence of holders, or by the voting, of membership interests that are not qualified membership interests.
(5) If a members’ vote does not comply with subsection (d)(1) solely because of a director’s or officer’s failure to comply with subsection (d)(2), and if the director or officer establishes that the failure was not intended to influence and did not in fact determine the outcome of the vote, then the action by the members respecting the conflicting interest transaction shall be given effect.
(6) Where members’ action under this section does not satisfy a quorum or voting requirement applicable to the authorization of the conflicting interest transaction by reason of the certificate of incorporation, the bylaws, or another provision of this chapter, independent action to satisfy those authorization requirements shall be taken by the members, in which action membership interests that are not qualified membership interests may participate.
(7) Where members’ action under this subsection (d) is taken without a meeting in accordance with Section 10A-3A-7.04, the action is effective even though members holding membership interests that are not qualified membership interests sign a consent to that action.
(e) Notwithstanding subsections (c) and (d), if a controlling person has the power and authority to approve the conflicting interest transaction pursuant to a provision in the certificate of incorporation permitted by Section 10A-3A-8.01, the conflicting interest transaction shall be approved by that controlling person.
(f) An act or transaction effected or proposed to be effected by a membership nonprofit corporation (or by an entity controlled by the membership nonprofit corporation) may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a controlling person or a member of a control group of the membership nonprofit corporation, on the grounds that the controlling person or member of a control group has an interest respecting the act or transaction, if the act or transaction is not a controlling person transaction.
(g) A controlling person transaction may not be the subject of equitable relief, or give rise to an award of damages or other sanctions, against a director or officer of the membership nonprofit corporation or any controlling person or member of a control group, by reason of a claim based on a breach of duty by a director, officer, controlling person, or member of a control group, if:
(1) the controlling person transaction is approved in accordance with the provisions of the certificate of incorporation, bylaws, rules, regulations, policies, or agreements among the members and the membership nonprofit corporation; or
(2) the controlling person transaction is at the relevant time fair to the membership nonprofit corporation.
(Act 2026-495, §3.)
(a) An act or transaction effected or proposed to be effected by a nonmembership nonprofit corporation (or by an entity controlled by the nonmembership nonprofit corporation) may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a director or officer of the nonmembership nonprofit corporation, on the grounds that the director or officer has an interest respecting the act or transaction, if the act or transaction is not a conflicting interest transaction.
(b) A conflicting interest transaction may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a director or officer of the nonmembership nonprofit corporation, on the grounds that the director or officer has an interest respecting the conflicting interest transaction, if:
(1) the directors’ action respecting the act or transaction was taken in compliance with subsection (c) at any time; or
(2) the act or transaction is at the relevant time fair to the nonmembership nonprofit corporation.
(c)(1) Directors’ action respecting a conflicting interest transaction is effective for purposes of subsection (b)(1) if the conflicting interest transaction has been authorized, after required disclosure by the conflicted director or officer of information not already known by the qualified directors, or after modified disclosure in compliance with subsection (c)(2), by (A) the affirmative vote of a majority (but no fewer than two) of the qualified directors who voted on the conflicting interest transaction or (B) the affirmative vote of a majority of the members of a board committee that is composed of only qualified directors (but no fewer than two). Directors’ action respecting a conflicting interest transaction is effective even though the conflicted director or officer is present at or participates in the meeting of the board or committee which authorizes the act or transaction or was involved in the initiation, negotiation, or approval of the act or transaction.
(2) Notwithstanding subsection (c)(1), when a transaction is a conflicting interest transaction only because a related person described in clause (v) or (vi) of the definition of “related person” in Section 10A-3A-2.02 is a party to or has a material financial interest in the conflicting interest transaction, the conflicted director or officer is not obligated to make required disclosure to the extent that the director or officer reasonably believes that doing so would violate a duty imposed under law, a legally enforceable obligation of confidentiality, or a professional ethics rule, provided that the conflicted director or officer discloses to the qualified directors voting on the conflicting interest transaction:
(i) all information required to be disclosed that is not so violative;
(ii) the existence and nature of the director’s or officer’s conflicting interest; and
(iii) the nature of the conflicted director’s or officer’s duty not to disclose the confidential information.
(3) A majority (but no fewer than two) of all the qualified directors on the board of directors, or on the board committee, constitutes a quorum for purposes of action that complies with this section.
(4) Where directors’ action under this subsection (c) does not satisfy a quorum or voting requirement applicable to the authorization of the conflicting interest transaction by reason of the certificate of incorporation, the bylaws, or another provision of this chapter, independent action to satisfy those authorization requirements shall be taken by the board of directors or a board committee, in which action directors who are not qualified directors may participate.
(5) Where directors’ action under this subsection (c) is taken without a meeting in accordance with Section 10A-3A-8.21, the action is effective even though a conflicted director signs a consent to that action.
(d) Notwithstanding subsection (c), if a controlling person has the power and authority to approve the conflicting interest transaction pursuant to a provision in the certificate of incorporation permitted by Section 10A-3A-8.01, the conflicting interest transaction shall be approved by that controlling person.
(e) An act or transaction effected or proposed to be effected by a nonmembership nonprofit corporation (or by an entity controlled by the nonmembership nonprofit corporation) may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against a controlling person or a member of a control group of the nonmembership nonprofit corporation, on the grounds that the controlling person or member of a control group has an interest respecting the act or transaction, if the act or transaction is not a controlling person transaction.
(f) A controlling person transaction may not be the subject of equitable relief, or give rise to an award of damages or other sanctions, against a director or officer of the nonmembership nonprofit corporation or any controlling person or member of a control group, by reason of a claim based on a breach of duty by a director, officer, controlling person, or member of a control group, if:
(1) the controlling person transaction is approved in accordance with the provisions of the certificate of incorporation, bylaws, rules, regulations, or policies of the nonmembership nonprofit corporation; or
(2) the controlling person transaction is at the relevant time fair to the nonmembership nonprofit corporation.
(Act 2026-495, §3.)
(a) If a director or officer pursues or takes advantage of a corporate opportunity directly, or indirectly through or on behalf of another person, that action may not be the subject of equitable relief, or give rise to an award of damages or other sanctions against the director, officer, or other person on the grounds that the corporate opportunity should have first been offered to the nonprofit corporation, if (1) before the director, officer, or other person becomes legally obligated respecting the corporate opportunity the director or officer brings it to the attention of the nonprofit corporation and either: (i) action by qualified directors disclaiming the nonprofit corporation’s interest in the corporate opportunity is taken in compliance with the same procedures as are set forth in Section 10A-3A-8.61(c) or Section 10A-3A-8.62(c); (ii) with respect to a membership nonprofit corporation, members’ action disclaiming the membership nonprofit corporation’s interest in the corporate opportunity is taken in compliance with the procedures set forth in Section 10A-3A-8.61(d); or (iii) if a controlling person has the power and authority to disclaim the nonprofit corporation’s interest in the corporate opportunity pursuant to a provision in the certificate of incorporation permitted by Section 10A-3A-8.01, action disclaiming the nonprofit corporation’s interest in the corporate opportunity is taken by that controlling person, in each case as if the decision being made concerned a conflicting interest transaction, except that, rather than making “required disclosure” as defined in Section 10A-3A-8.60, the director or officer shall have made prior disclosure to those acting on behalf of the nonprofit corporation of all material facts concerning the corporate opportunity known to the director or officer; or (2) the duty to offer the nonprofit corporation the corporate opportunity has been limited or eliminated pursuant to a provision of the certificate of incorporation adopted (and where required, made effective by action of qualified directors) in accordance with Section 10A-3A-2.02(b)(6).
(b) In any proceeding seeking equitable relief or other remedies based upon an alleged improper pursuit or taking advantage of a corporate opportunity by a director or officer directly, or indirectly through or on behalf of another person, the fact that the director or officer did not employ the procedure described in subsection (a)(1) before pursuing or taking advantage of the corporate opportunity shall not create an implication that the corporate opportunity should have been first presented to the nonprofit corporation or alter the burden of proof otherwise applicable to establish that the director or officer breached a duty to the nonprofit corporation in the circumstances.
(Act 2026-495, §4.)
Division B of Article 3 of Chapter 1 shall not apply to this chapter.
(Act 2023-503, §1.)
(a) A nonprofit corporation may amend its certificate of incorporation at any time to add or change a provision that is required or permitted in the certificate of incorporation as of the effective date of the amendment or to delete a provision that is not required to be contained in the certificate of incorporation. Whether a provision is required or permitted in the certificate of incorporation is determined as of the effective date of the amendment.
(b) Neither (i) a member of a membership nonprofit corporation nor (ii) a person having rights under the certificate of incorporation, has a vested property right resulting from any provision in the certificate of incorporation, including provisions relating to management, control, purpose, or duration of the nonprofit corporation.
(Act 2023-503, §1.)
Subject to Section 10A-3A-9.30, if a membership nonprofit corporation has not yet admitted any members, the board of directors, or its incorporators if it has no board of directors, may adopt one or more amendments to the membership nonprofit corporation’s certificate of incorporation.
(Act 2023-503, §1.)
If a membership nonprofit corporation has admitted any members, an amendment to the certificate of incorporation shall be adopted in the following manner:
(a) The proposed amendment shall first be adopted by the board of directors.
(b) Except as provided in subsection (g) and Sections 10A-3A-9.07 and 10A-3A-9.08, the amendment shall then be approved by the members entitled to vote on the amendment. In submitting the proposed amendment to the members for approval, the board of directors shall recommend that the members approve the amendment, unless the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make such a recommendation, in which case the board of directors must inform the members of the basis for that determination.
(c) The board of directors may set conditions for the approval of the amendment by the members or the effectiveness of the amendment.
(d) If the amendment is required to be approved by the members, and the approval is to be given at a meeting, the membership nonprofit corporation shall notify each member entitled to vote on the amendment of the meeting of members at which the amendment is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the amendment. The notice must contain or be accompanied by a copy of the amendment.
(e) Unless the certificate of incorporation, or the board of directors acting pursuant to subsection (c), requires a greater vote or a greater quorum, approval of the amendment requires the approval of the members at a meeting at which a quorum consisting of a majority of the votes entitled to be cast on the amendment exists, and, if any class of members is entitled to vote as a separate group on the amendment, except as provided in Section 10A-3A-9.04(d), the approval of each separate voting group at a meeting at which a quorum of the voting group exists consisting of a majority of the votes entitled to be cast on the amendment by that voting group.
(f) In addition to the adoption and approval of an amendment by the board of directors and members as required by this section, an amendment must also be approved by a person or group of persons, if any, whose approval is required by the certificate of incorporation in accordance with Section 10A-3A-9.30.
(g) Unless the certificate of incorporation provides otherwise, the board of directors of a membership nonprofit corporation may adopt amendments to the membership nonprofit corporation’s certificate of incorporation without approval of the members to:
(1) extend the duration of the membership nonprofit corporation if it was incorporated at a time when limited duration was required by law;
(2) delete the names and addresses of the incorporators or initial directors;
(3) delete the name and address of the initial registered agent or registered office, if a statement of change is on file with the Secretary of State;
(4) delete a class of members from the certificate of incorporation when there are no members in that class; or
(5) change the membership nonprofit corporation name, provided that the name complies with Article 5 of Chapter 1.
(Act 2023-503, §1.)
Except as provided in the certificate of incorporation or bylaws:
(a) If a membership nonprofit corporation has more than one class of members, the members of each class are entitled to vote as a separate voting group (if member voting is otherwise required by this chapter) on a proposed amendment to the certificate of incorporation if the amendment would:
(1) effect an exchange or reclassification of all or part of the memberships of the class into memberships of another class;
(2) effect an exchange or reclassification, or create the right of exchange, of all or part of the memberships of another class into memberships of the class;
(3) change the rights, preferences, or limitations of all or part of the memberships of the class;
(4) change the rights, preferences, or limitations of all or part of the memberships of the class by changing the rights, preferences, or limitations of another class;
(5) create a new class of memberships having rights or preferences that are prior or superior to the other memberships;
(6) increase or decrease the number of memberships authorized for the class;
(7) increase or decrease the number of memberships authorized for another class; or
(8) authorize a new class of memberships.
(b) If a class of members will be divided into two or more classes by an amendment to the certificate of incorporation, the amendment must be approved by a majority of the members of each class that will be created.
(c) If a proposed amendment would affect less than all of the members of a class in one or more of the ways described in subsection (a), the members so affected are entitled to vote as a separate voting group on the proposed amendment.
(d) If a proposed amendment that entitles the holders of two or more classes of memberships to vote as separate voting groups under this section would affect those two or more classes in the same or a substantially similar way, the holders of the memberships of all the classes so affected shall vote together as a single voting group on the proposed amendment, unless added as a condition by the board of directors pursuant to Section 10A-3A-9.03(c).
(Act 2023-503, §1.)
Except as otherwise provided in the certificate of incorporation:
(1) the board of directors of a nonmembership nonprofit corporation, or if the initial board of directors of a nonmembership nonprofit corporation is not named in the certificate of incorporation and has not yet been elected, appointed, or designated, its incorporators may adopt amendments to the nonmembership nonprofit corporation’s certificate of incorporation; and
(2) an amendment adopted under this section must also be approved by that person or group of persons, if any, whose approval is required by the certificate of incorporation in accordance with Section 10A-3A-9.30.
(Act 2023-503, §1; Act 2024-413, §1.)
(a) After an amendment to the certificate of incorporation has been adopted and approved in the manner required by this chapter, the certificate of incorporation, and bylaws, the nonprofit corporation must deliver to the Secretary of State, for filing, a certificate of amendment, which must set forth:
(1) the name of the nonprofit corporation;
(2) the text of each amendment adopted or the information required by Section 10A-3A-1.04(c)(5);
(3) if an amendment provides for an exchange, reclassification, or cancellation of memberships, provisions for implementing the amendment if not contained in the amendment itself (which may be made dependent upon facts objectively ascertainable outside the articles of amendment in accordance with Section 10A-3A-1.04(c)(5));
(4) the date of each amendment’s adoption;
(5) a statement that the amendment was adopted:
(i) in accordance with Sections 10A-3A-9.02, if the nonprofit corporation is a membership nonprofit corporation which has not yet admitted one or more members;
(ii) in accordance with Sections 10A-3A-9.03 and 10A-3A-9.04, if the nonprofit corporation is a membership nonprofit corporation which has admitted one of more members;
(iii) in accordance with Section 10A-3A-9.05, if the nonprofit corporation is a nonmembership nonprofit corporation; or
(iv) in accordance with Section 10A-3A-1.04(c)(5);
(6) a statement that the amendment was adopted in accordance with Section 10A-9A-9.30, if applicable; and
(7) the unique identifying number or other designation as assigned by the Secretary of State.
(b) A certificate of amendment shall take effect at the effective date and time determined in accordance with Article 4 of Chapter 1.
(Act 2023-503, §1.)
(a)(1) A membership nonprofit corporation’s board of directors may restate its certificate of incorporation at any time, without the approval of the members or any person or group of persons specified in the certificate of incorporation, to consolidate all amendments into a single document. Unless the certificate of incorporation of a membership nonprofit corporation provides otherwise, the restated certificate of incorporation may amend the certificate of incorporation with those amendments that the board of directors is permitted to adopt in accordance with Sections 10A-3A-9.02 and 10A-3A-9.03(g) without the approval of the members or any person or group of persons specified in the certificate of incorporation. Unless the certificate of incorporation of a membership nonprofit corporation provides otherwise, the restated certificate of incorporation of a membership nonprofit corporation may also amend the certificate of incorporation with those amendments that the member or any person or group of persons specified in the certificate of incorporation must approve in accordance with Sections 10A-3A-9.02, 10A-3A-9.03, 10A-3A-9.04, and 10A-3A-9.30.
(2) A nonmembership nonprofit corporation’s board of directors may restate its certificate of incorporation at any time without the approval of any person or group of persons specified in the certificate of incorporation to consolidate all amendments into a single document. Unless the certificate of incorporation of a nonmembership nonprofit corporation provides otherwise, the restated certificate of incorporation may amend the certificate of incorporation with those amendments that the board of directors is permitted to adopt in accordance with Section 10A-3A-9.05 without the approval of any person or group of persons specified in the certificate of incorporation. Unless the certificate of incorporation of a nonmembership nonprofit corporation provides otherwise, the restated certificate of incorporation of a nonmembership nonprofit corporation may also amend the certificate of incorporation with those amendments that any person or group of persons specified in the certificate of incorporation must approve in accordance with Sections 10A-3A-9.02, 10A-3A-9.05, and 10A-3A-9.30.
(b) If the restated certificate of incorporation includes one or more new amendments, the amendments must be adopted and approved as provided in (i) Section 10A-3A-9.02, (ii) Sections 10A-3A-9.03 and 10A-3A-9.04, or (iii) Section 10A-3A-9.05.
(c) A nonprofit corporation that restates its certificate of incorporation shall deliver to the Secretary of State for filing a certificate of restatement setting forth:
(1) the name of the nonprofit corporation;
(2) the text of the restated certificate of incorporation;
(3) a statement that the restated certificate of incorporation consolidates all amendments into a single document;
(4) if a new amendment is included in the restated certificate of incorporation, the statements required under Section 10A-3A-9.06 with respect to the new amendment; and
(5) the unique identifying number or other designation as assigned by the Secretary of State.
(d) The duly adopted restated certificate of incorporation supersedes the original certificate of incorporation and all amendments to the certificate of incorporation.
(e) Unless the certificate of incorporation provides otherwise, a restated certificate of incorporation may omit the information that may be deleted pursuant to Section 10A-3A-9.03(g).
(Act 2023-503, §1; Act 2024-413, §1.)
(a) A nonprofit corporation’s certificate of incorporation may be amended without action by the board of directors, the members, if any, or a person or group of persons, if any, whose approval is required by the certificate of incorporation in accordance with Section 10A-3A-9.30, to carry out a plan of reorganization ordered or decreed by a court of competent jurisdiction under the authority of a law of the United States if the certificate of incorporation after the amendment only contains provisions required or permitted by Section 10A-3A-2.02.
(b) The individual or individuals designated by the court shall deliver to the Secretary of State for filing a certificate of amendment setting forth:
(1) the name of the nonprofit corporation;
(2) the text of each amendment approved by the court;
(3) the date of the court’s order or decree approving the certificate of amendment;
(4) the title of the reorganization proceeding in which the order or decree was entered;
(5) a statement that the court had jurisdiction of the proceeding under federal statute; and
(6) the unique identifying number or other designation as assigned by the Secretary of State.
(c) This section does not apply after entry of a final decree in the reorganization proceeding even though the court retains jurisdiction of the proceeding for limited purposes unrelated to consummation of the reorganization plan.
(Act 2023-503, §1.)
(a) An amendment to the certificate of incorporation does not affect:
(1) a cause of action existing against or in favor of the nonprofit corporation;
(2) a proceeding to which the nonprofit corporation is a party; or
(3) the existing rights of persons other than (i) members of the nonprofit corporation, if any, or (ii) a person or group of persons, if any, specified in the certificate of incorporation as having approval rights under Section 10A-3A-9.30.
(b) An amendment changing a nonprofit corporation’s name does not affect a proceeding brought by or against the nonprofit corporation in its former name.
(Act 2023-503, §1.)
(a) A restated certificate of incorporation takes effect when the filing of the restated certificate of incorporation takes effect as provided by Article 4 of Chapter 1.
(b) On the date and time the restated certificate of incorporation takes effect, the original certificate of incorporation and each prior amendment or restatement of the certificate of incorporation is superseded and the restated certificate of incorporation is the effective certificate of incorporation.
(c) Section 10A-3A-9.09 applies to an amendment effected by a restated certificate of incorporation.
(Act 2023-503, §1.)
(a) The members of a membership nonprofit corporation may amend or repeal the membership nonprofit corporation’s bylaws except as provided in the certificate of incorporation or bylaws.
(b) The board of directors of a membership nonprofit corporation or nonmembership nonprofit corporation may amend or repeal the nonprofit corporation’s bylaws, except as provided in the certificate of incorporation, bylaws, Section 10A-3A-9.21, or Section 10A-3A-9.22.
(c) Neither (i) a member of a membership nonprofit corporation nor (ii) a person or group of persons having rights under the certificate of incorporation, has a vested property right resulting from any provision in the bylaws, including provisions relating to management, control, or purpose of the nonprofit corporation.
(Act 2023-503, §1.)
In a membership nonprofit corporation:
(a) A bylaw that increases a quorum or voting requirement for the board of directors or that requires a meeting of the members to be held at a place may be amended or repealed:
(1) if originally adopted by the members, only by the members, unless the bylaw otherwise provides;
(2) if adopted by the board of directors, either by the members or the board of directors.
(b) A bylaw adopted or amended by the members that increases a quorum or voting requirement for the board of directors may provide that it can be amended or repealed only by a specified vote of either the members or the board of directors.
(c) Action by the board of directors under subsection (a) to amend or repeal a bylaw that changes a quorum or voting requirement for the board of directors shall meet the same quorum requirement and be adopted by the same vote required to take action under the quorum.
(Act 2023-503, §1.)
In a membership nonprofit corporation, except as provided in the certificate of incorporation or bylaws:
(a) The board of directors of a membership nonprofit corporation that has one or more members at the time may not adopt or amend a bylaw under:
(1) Section 10A-3A-6.10 providing that some of the members shall have different rights or obligations than other members with respect to voting, dissolution, transfer of memberships, or other matters;
(2) Section 10A-3A-6.13 levying dues, assessments, or fees on some or all of the members;
(3) Section 10A-3A-6.21 relating to the termination or suspension of members;
(4) Section 10A-3A-8.08(a):
(i) requiring cause to remove a director; or
(ii) specifying what constitutes cause to remove a director; or
(5) Section 10A-3A-8.08(e) relating to the removal of a director who is designated in a manner other than election or appointment.
(b) The board of directors of a membership nonprofit corporation may not amend the certificate of incorporation or bylaws to vary the application of subsection (a) to the membership nonprofit corporation.
(c) If a membership nonprofit corporation has more than one class of members, the members of a class are entitled to vote as a separate voting group on an amendment to the bylaws that:
(1) is described in subsection (a) if the amendment would affect the members of that class differently than the members of another class; or
(2) has any of the effects described in Section 10A-3A-9.04.
(d) If a class of members will be divided into two or more classes by an amendment to the bylaws, the amendment must be approved by a majority of the members of each class that will be created.
(Act 2023-503, §1.)
(a) The certificate of incorporation of a membership nonprofit corporation may require that an amendment to the certificate of incorporation, including amendments under Section 10A-3A-9.03(g), be approved in writing by a specified person or group of persons in addition to the board of directors and members. The certificate of incorporation of a nonmembership nonprofit corporation may require that an amendment to the certificate of incorporation be approved in writing by a specified person or group of persons in addition to the board of directors.
(b) The certificate of incorporation or bylaws of a membership nonprofit corporation may require that an amendment to the bylaws be approved in writing by a specified person or group of persons in addition to the board of directors and members. The certificate of incorporation or bylaws of a nonmembership nonprofit corporation may require that an amendment to the bylaws be approved in writing by a specified person or group of persons in addition to the board of directors.
(c) A requirement in the certificate of incorporation or bylaws described in subsection (a) or (b) may only be amended with the approval in writing of the specified person or group of persons.
(Act 2023-503, §1.)
In a membership nonprofit corporation:
(a) No approval of the members or any person or group of persons specified in the certificate of incorporation is required, unless the certificate of incorporation otherwise provides:
(1) to sell, lease, exchange, or otherwise dispose of any or all of the membership nonprofit corporation’s assets in the usual and regular course of the membership nonprofit corporation’s activities;
(2) to mortgage, pledge, dedicate to the repayment of indebtedness (whether with or without recourse), or otherwise encumber any or all of the membership nonprofit corporation’s assets, regardless of whether in the usual and regular course of its activities; or
(3) to transfer any or all of the membership nonprofit corporation’s assets to one or more corporations or other entities all of the memberships or interests of which are owned by the membership nonprofit corporation.
(b) Unless the certificate of incorporation otherwise provides, without limiting the rights of a secured party under applicable law, no approval by members or any person or group of persons specified in the certificate of incorporation shall be required by Section 10A-3A-10.02 for a sale, lease, exchange, or other disposition of any of the membership nonprofit corporation’s assets if those assets are mortgaged, pledged, dedicated to the repayment of indebtedness, or otherwise encumbered for the benefit of a secured party or other creditor and either:
(1) The secured party or other creditor exercises its rights under the law governing the mortgage, pledge, dedication, or encumbrance, or other applicable law, whether under the Uniform Commercial Code, a real property law, or other law, to effect the sale, lease, exchange, or other disposition of those assets without the consent of the corporation; or
(2) In lieu of the secured party or other creditor exercising such rights, the board of directors of the membership nonprofit corporation authorizes an alternative sale, lease, exchange, or other disposition of those assets, whether with the secured party or other creditor, that results in the reduction or elimination of the total liabilities or obligations secured by those assets, provided that (i) the value of those assets is less than or equal to the total amount of the liabilities or obligations being eliminated or reduced and (ii) the sale, lease, exchange, or other disposition of those assets is not prohibited by the law governing the mortgage, pledge, dedication, or encumbrance. The provision of consideration to the membership nonprofit corporation shall not create a presumption that the value of the assets is greater than the total amount of the liabilities or obligations being eliminated or reduced.
(c) A failure to satisfy the condition in subsection (b)(2)(i) shall not result in the invalidation of a sale, lease, exchange, or other disposition of the membership nonprofit corporation’s assets if the transferee of those assets (i) provided value therefor (which may include the reduction or elimination of the total liabilities or obligations secured by those assets) and (ii) acted in good faith (as defined in Section 7-1-201(b)). The preceding sentence shall not apply to a proceeding against the membership nonprofit corporation and any other necessary parties to enjoin the sale, lease, exchange, or other disposition of the membership nonprofit corporation’s assets before the consummation thereof and shall not eliminate any liability for monetary damages for any claim, including a claim in the right of the membership nonprofit corporation, based upon a violation of a duty by a current or former director or officer, or other person.
(d) A provision of the certificate of incorporation that requires the authorization or consent of members or any person or group of persons specified in the certificate of incorporation for a sale, lease, exchange, or other disposition of the membership nonprofit corporation’s assets shall not apply to a transaction permitted by subsection (b) unless that provision expressly so requires.
(Act 2023-503, §1; Act 2024-413, §1.)
(a) A sale, lease, exchange, or other disposition of assets, other than a disposition described in Section 10A-3A-10.01, requires approval of the membership nonprofit corporation’s members if the disposition would leave the membership nonprofit corporation without a significant continuing activity. A membership nonprofit corporation will conclusively be deemed to have retained a significant continuing activity if it retains an activity that represented, for the membership nonprofit corporation and its subsidiaries on a consolidated basis, at least (i) 25 percent of total assets at the end of the most recently completed fiscal year, and (ii) either 25 percent of either income from continuing operations before taxes or 25 percent of revenues from continuing operations, in each case for the most recently completed fiscal year.
(b) To obtain the approval of the members under subsection (a), the board of directors shall first adopt a resolution authorizing the disposition. The disposition shall then be approved by the members. In submitting the disposition to the members for approval, the board of directors shall recommend that the members approve the disposition, unless the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make a recommendation, in which case the board of directors must inform the members of the basis for that determination.
(c) The board of directors may set conditions for the approval by the members of a disposition or the effectiveness of the disposition.
(d) If a disposition is required to be approved by the members under subsection (a), and if the approval is to be given at a meeting, the membership nonprofit corporation shall notify each member entitled to vote on the matter of the meeting of members at which the disposition is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the disposition and must contain a description of the disposition, including the terms and conditions of the disposition and the consideration to be received by the membership nonprofit corporation.
(e) Unless the certificate of incorporation, bylaws, or the board of directors acting pursuant to subsection (c) requires a greater vote or a greater quorum, the approval of a disposition by the members shall require the approval of the members at a meeting at which a quorum exists consisting of a majority of the votes entitled to be cast on the disposition.
(f) After a disposition has been approved by the members under this Article 10, and at any time before the disposition has been consummated, it may be abandoned by the membership nonprofit corporation without action by the members, subject to any contractual rights of other parties to the disposition.
(g) A disposition of assets in the course of dissolution under Article 11 is not governed by this section.
(h) For purposes of this section only, the property and assets of the membership nonprofit corporation include the property and assets of any subsidiary of the membership nonprofit corporation. As used in this subsection, “subsidiary” means any entity wholly owned and controlled, directly or indirectly, by the membership nonprofit corporation and includes, without limitation, nonprofit corporations, business corporations, partnerships (including limited liability partnerships), limited partnerships (including limited liability limited partnerships), limited liability companies, and/or statutory trusts, whether domestic or foreign.
(i) In addition to the approval of a disposition of assets by the board of directors and members as required by this section, the disposition must also be approved in writing by a person or group of persons whose approval is required under the certificate of incorporation in accordance with Section 10A-3A-10.04.
(Act 2023-503, §1.)
In a nonmembership nonprofit corporation:
(a) Unless the certificate of incorporation otherwise provides:
(1) a sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, the property and assets of the nonmembership nonprofit corporation may be approved by the board of directors; and
(2) a sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, of the property and assets of the nonmembership nonprofit corporation approved by the board of directors under this section must also be approved by that person or group of persons whose approval is required by the certificate of incorporation in accordance with Section 10A-3A-10.04.
(b) Unless the certificate of incorporation otherwise provides, without limiting the rights of a secured party under applicable law, no approval by any person or group of persons specified in the certificate of incorporation shall be required by this section for a sale, lease, exchange, or other disposition of any of the nonmembership nonprofit corporation’s assets if those assets are mortgaged, pledged, dedicated to the repayment of indebtedness, or otherwise encumbered for the benefit of a secured party or other creditor and either:
(1) The secured party or other creditor exercises its rights under the law governing the mortgage, pledge, dedication, or encumbrance, or other applicable law, whether under the Uniform Commercial Code, a real property law, or other law, to effect the sale, lease, exchange, or other disposition of those assets without the consent of the nonmembership nonprofit corporation; or
(2) In lieu of the secured party or other creditor exercising such rights, the board of directors of the nonmembership nonprofit corporation authorizes an alternative sale, lease, exchange, or other disposition of those assets, whether with the secured party or other creditor, that results in the reduction or elimination of the total liabilities or obligations secured by those assets, provided that (i) the value of those assets is less than or equal to the total amount of the liabilities or obligations being eliminated or reduced and (ii) the sale, lease, exchange, or other disposition of those assets is not prohibited by the law governing the mortgage, pledge, dedication, or encumbrance. The provision of consideration to the nonmembership nonprofit corporation shall not create a presumption that the value of the assets is greater than the total amount of the liabilities or obligations being eliminated or reduced.
(c) A failure to satisfy the condition in subsection (b)(2)(i) shall not result in the invalidation of a sale, lease, exchange, or other disposition of the nonmembership nonprofit corporation’s assets if the transferee of those assets (i) provided value therefor (which may include the reduction or elimination of the total liabilities or obligations secured by those assets) and (ii) acted in good faith (as defined in Section 7-1-201(b)). The preceding sentence shall not apply to a proceeding against the nonmembership nonprofit corporation and any other necessary parties to enjoin the sale, lease, exchange, or other disposition of the nonmembership nonprofit corporation’s assets before the consummation thereof and shall not eliminate any liability for monetary damages for any claim, including a claim in the right of the nonmembership nonprofit corporation, based upon a violation of a duty by a current or former director or officer, or other person.
(d) A provision of the certificate of incorporation that requires the authorization or consent of any person or group of persons specified in the certificate of incorporation for a sale, lease, exchange, or other disposition of the nonmembership nonprofit corporation’s assets shall not apply to a transaction permitted by subsection (b) unless that provision expressly so requires.
(Act 2023-503, §1; Act 2024-413, §1.)
(a) The certificate of incorporation of a membership nonprofit corporation may require that a disposition of assets under either or both Section 10A-3A-10.01 and Section 10A-3A-10.02 be approved in writing by a specified person or group of persons in addition to the board of directors and members.
(b) The certificate of incorporation of a nonmembership nonprofit corporation may require that a disposition of assets under Section 10A-3A-10.03 be approved in writing by a specified person or group of persons in addition to the board of directors.
(c) A requirement in the certificate of incorporation described in subsection (a) or (b) may only be approved by the written approval of the specified person or group of persons.
(Act 2023-503, §1; Act 2024-413, §1.)
A majority of the incorporators or initial directors of a nonprofit corporation that has not commenced activity may dissolve the nonprofit corporation by delivering to the Secretary of State for filing a certificate of dissolution that sets forth:
(1) the name of the nonprofit corporation;
(2) the date of its incorporation;
(3) that the nonprofit corporation has not commenced activity;
(4) that no debt of the nonprofit corporation remains unpaid;
(5) that the net assets of the nonprofit corporation remaining after winding up have been distributed;
(6) that a majority of the incorporators or directors authorized the dissolution; and
(7) the unique identifying number or other designation as assigned by the Secretary of State.
(Act 2023-503, §1.)
(a) The board of directors of a membership nonprofit corporation may propose dissolution for submission to the members by first adopting a resolution authorizing the dissolution.
(b) For a proposal to dissolve to be adopted, it shall then be approved by the members entitled to vote thereon. In submitting the proposal to dissolve to the members for approval, the board of directors shall recommend that the members approve the dissolution, unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation in which case the board of directors must inform the members of the basis for that determination.
(c) The board of directors may set conditions for the approval of the proposal for dissolution by the members or the effectiveness of the dissolution.
(d) If the approval of the members is to be given at a meeting, the membership nonprofit corporation shall notify each member entitled to vote on the dissolution, of the meeting of members at which the dissolution is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider dissolving the membership nonprofit corporation and how the assets of the membership nonprofit corporation will be distributed after all creditors have been paid, or how the distribution of assets will be determined.
(e) Unless the certificate of incorporation, the bylaws, or the board of directors acting pursuant to subsection (c), requires a greater vote, a greater quorum, or a vote by voting groups, adoption of the proposal to dissolve shall require the approval of the members at a meeting at which a quorum exists consisting of a majority of the votes entitled to be cast on the proposal to dissolve.
(f) Dissolution of a membership nonprofit corporation may also be authorized without action of the directors if all the members entitled to vote thereon shall consent in writing and a certificate of dissolution shall be delivered to the Secretary of State for filing pursuant to Section 10A-3A-11.05.
(g) In addition to the approval of the dissolution of a membership nonprofit corporation as set forth in subsections (a) through (f), the dissolution must also be approved in writing by a person or group of persons whose approval is required under the certificate of incorporation in accordance with Section 10A-3A-11.04.
(Act 2023-503, §1.)
Except as otherwise provided in the certificate of incorporation:
(1) the dissolution of a nonmembership nonprofit corporation may be approved by the board of directors; and
(2) the dissolution of the nonmembership nonprofit corporation approved by the board of directors under this section must also be approved by those persons whose approval is required by the certificate of incorporation in accordance with Section 10A-3A-11.04.
(Act 2023-503, §1.)
(a) The certificate of incorporation of a membership nonprofit corporation may require that a dissolution of a membership nonprofit corporation under Section 10A-3A-11.02 be approved in writing by a specified person or group of persons in addition to the board of directors and members.
(b) The certificate of incorporation of a nonmembership nonprofit corporation may require that a dissolution of a nonmembership nonprofit corporation under Section 10A-3A-11.03 be approved in writing by a specified person or group of persons in addition to the board of directors.
(c) A requirement in the certificate of incorporation described in subsection (a) or (b) may only be approved by the written approval of the specified person or group of persons.
(Act 2023-503, §1.)
(a) At any time after dissolution is authorized, the nonprofit corporation may dissolve by delivering to the Secretary of State for filing a certificate of dissolution setting forth:
(1) the name of the nonprofit corporation;
(2) the date that dissolution was authorized;
(3) if dissolution of a membership nonprofit corporation was approved in accordance with Section 10A-3A-11.02, a statement that the proposal to dissolve was duly approved in the manner required by this chapter and by the certificate of incorporation;
(4) if dissolution of a nonmembership nonprofit corporation was approved in accordance with Section 10A-3A-11.03, a statement that the proposal to dissolve was duly approved in the manner required by this chapter and by the certificate of incorporation;
(5) if dissolution of a nonprofit corporation was approved in accordance with Section 10A-3A-11.02 or Section 10A-3A-11.03, and the certificate of incorporation required the dissolution to also be approved by a specified person or group of persons in accordance with Section 10A-3A-11.04, a statement that the proposal to dissolve was duly approved by the manner required by this chapter and by the certificate of incorporation; and
(6) the unique identifying number or other designation as assigned by the Secretary of State.
(b) The certificate of dissolution shall take effect at the effective date determined in accordance with Article 4 of Chapter 1. A nonprofit corporation is dissolved upon the effective date of its certificate of dissolution.
(c) For purposes of this Division A of this Article 11, “dissolved nonprofit corporation” means a nonprofit corporation whose certificate of dissolution has become effective and includes a successor entity to which the remaining assets of the nonprofit corporation are transferred subject to its liabilities for purposes of liquidation.
(Act 2023-503, §1.)
(a) A nonprofit corporation may revoke its dissolution within 120 days after its effective date and be reinstated.
(b) Revocation of dissolution and reinstatement shall be authorized in the same manner as the dissolution was authorized unless that authorization permitted revocation and reinstatement by action of the board of directors alone, in which event the board of directors may revoke the dissolution and effect the reinstatement without member action and without the action of the specified person or group of persons set forth in the certificate of incorporation in accordance with Section 10A-3A-11.04.
(c) After the revocation of dissolution and reinstatement is authorized, the nonprofit corporation may revoke the dissolution and effect the reinstatement by delivering to the Secretary of State for filing a certificate of revocation of dissolution and reinstatement, together with a copy of its certificate of dissolution, that sets forth:
(1) the name of the nonprofit corporation;
(2) the effective date of the dissolution that was revoked;
(3) the date that the revocation of dissolution and reinstatement was authorized;
(4) if the nonprofit corporation’s board of directors (or incorporators) revoked the dissolution and effected the reinstatement, a statement to that effect;
(5) if the nonprofit corporation’s board of directors revoked a dissolution and effected the reinstatement as authorized by the members and any specified person or group of persons set forth in the certificate of incorporation in accordance with Section 10A-3A-11.04, a statement that revocation and reinstatement was permitted by action by the board of directors alone pursuant to that authorization;
(6) if member action was required to revoke the dissolution and effect the reinstatement, a statement that the revocation and reinstatement was duly approved by the members in the manner required by this chapter and by the certificate of incorporation;
(7) if the action of a specified person or group of persons set forth in the certificate of incorporation in accordance with Section 10A-3A-11.04 was required to revoke the dissolution and effect the reinstatement, a statement that the revocation and reinstatement was duly approved by that specified person or group of persons in the manner required by this chapter and by the certificate of incorporation; and
(8) the unique identifying number or other designation as assigned by the Secretary of State.
(d) The certificate of revocation of dissolution and reinstatement shall take effect at the effective date determined in accordance with Article 4 of Chapter 1. Revocation of dissolution and reinstatement is effective upon the effective date of the certificate of revocation of dissolution and reinstatement.
(e)(1) Subject to subdivision (2), upon revocation and reinstatement, the nonprofit corporation shall be deemed for all purposes to have continued its activities and affairs as if dissolution had never occurred; and each right inuring to, and each debt, obligation, and liability incurred by, the nonprofit corporation after the dissolution shall be determined as if the dissolution had never occurred.
(2) The rights of persons acting in reliance on the dissolution before those persons had notice of the revocation and reinstatement shall not be adversely affected by the revocation and reinstatement.
(f) If the nonprofit corporation is listed in the Secretary of State’s records as a nonprofit corporation that has been dissolved, then the name of the nonprofit corporation following revocation and reinstatement shall be that nonprofit corporation name at the time of revocation and reinstatement if that nonprofit corporation name complies with Article 5 of Chapter 1 at the time of revocation and reinstatement. If that nonprofit corporation name does not comply with Article 5 of Chapter 1, the name of the nonprofit corporation following revocation and reinstatement shall be that nonprofit corporation name followed by the word “reinstated.”
(Act 2023-503, §1.)
(a) A dissolved nonprofit corporation continues its existence as a nonprofit corporation but may not carry on any activity except as is appropriate to wind up and liquidate its activities and affairs, including:
(1) collecting its assets;
(2) disposing of its properties that will not be distributed in kind;
(3) discharging or making provisions for discharging its liabilities;
(4) distributing its remaining property as required by law, its certificate of incorporation, bylaws, and as approved when the dissolution was authorized; and
(5) doing every other act necessary to wind up and liquidate its activities and affairs.
(b) In winding up its activities and affairs, a dissolved nonprofit corporation may:
(1) preserve the nonprofit corporation’s activities and affairs and property as a going concern for a reasonable time;
(2) prosecute, defend, or settle actions or proceedings whether civil, criminal, or administrative;
(3) transfer the nonprofit corporation’s assets;
(4) resolve disputes by mediation or arbitration; and
(5) merge or convert in accordance with Article 12 or 13 of this chapter or Article 8 of Chapter 1.
(c) Dissolution of a nonprofit corporation does not:
(1) transfer title to the nonprofit corporation’s property;
(2) subject its directors or officers to standards of conduct different from those prescribed in Article 8 of this chapter;
(3) change:
(i) quorum or voting requirements for its board of directors or members;
(ii) provisions for selection, resignation, or removal of its directors or officers or both; or
(iii) provisions for amending its bylaws;
(4) prevent commencement of a proceeding by or against the nonprofit corporation in its corporate name;
(5) abate or suspend a proceeding pending by or against the nonprofit corporation on the effective date of dissolution; or
(6) terminate the authority of the registered agent of the nonprofit corporation.
(d) A distribution in liquidation under this section may only be made by a dissolved nonprofit corporation.
(Act 2023-503, §1; Act 2024-413, §1.)
(a) A dissolved nonprofit corporation may dispose of any known claims against it by following the procedures described in subsection (b) at any time after the effective date of the dissolution of the nonprofit corporation.
(b) A dissolved nonprofit corporation may give written notice of the dissolution to the holder of any known claim. The notice must:
(1) identify the dissolved nonprofit corporation;
(2) describe the information required to be included in a claim;
(3) provide a mailing address to which the claim is to be sent;
(4) state the deadline, which may not be fewer than 120 days from the effective date of the notice, by which the dissolved nonprofit corporation must receive the claim; and
(5) state that if not sooner barred, the claim will be barred if not received by the deadline.
(c) Unless sooner barred by any other statute limiting actions, a claim against a dissolved nonprofit corporation is barred:
(1) if a claimant who was given notice under subsection (b) does not deliver the claim to the dissolved nonprofit corporation by the deadline; or
(2) if a claimant whose claim was rejected by the dissolved nonprofit corporation does not commence a proceeding to enforce the claim within 90 days from the effective date of the rejection notice.
(d) For purposes of this section, “known claim” or “claim” includes unliquidated claims, but does not include a contingent liability that has not matured so that there is no immediate right to bring suit or a claim based on an event occurring after the effective date of dissolution.
(e) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(Act 2023-503, §1.)
(a) A dissolved nonprofit corporation may publish notice of its dissolution and request that persons with claims against the dissolved nonprofit corporation present them in accordance with the notice.
(b) The notice authorized by subsection (a) must:
(1) be published at least one time in a newspaper of general circulation in the county in which the dissolved nonprofit corporation’s principal office is located or, if it has none in this state, in the county in which the nonprofit corporation’s most recent registered office is located;
(2) describe the information that must be included in a claim and provide a mailing address to which the claim is to be sent; and
(3) state that if not sooner barred, a claim against the dissolved nonprofit corporation will be barred unless a proceeding to enforce the claim is commenced within two years after the publication of the notice.
(c) If a dissolved nonprofit corporation publishes a newspaper notice in accordance with subsection (b), unless sooner barred by any other statute limiting actions, the claim of each of the following claimants is barred unless the claimant commences a proceeding to enforce the claim against the dissolved nonprofit corporation within two years after the publication date of the newspaper notice:
(1) a claimant who was not given notice under Section 10A-3A-11.08;
(2) a claimant whose claim was timely sent to the dissolved nonprofit corporation but not acted on by the dissolved nonprofit corporation; and
(3) a claimant whose claim is contingent at the effective date of the dissolution of the nonprofit corporation, or is based on an event occurring after the effective date of the dissolution of the nonprofit corporation.
(d) A claim that is not barred under this section, any other statute limiting actions, or Section 10A-3A-11.08 may be enforced:
(1) against a dissolved nonprofit corporation, to the extent of its undistributed assets; and
(2) except as provided in subsection (h), if the assets of a dissolved nonprofit corporation have been distributed after dissolution, against any person, other than a creditor of the dissolved nonprofit corporation, to whom the nonprofit corporation distributed its property to the extent of the distributee’s pro rata share of the claim or the corporate assets distributed to the distributee in liquidation, whichever is less, but a distributee’s total liability for all claims under this section may not exceed the total amount of assets distributed to the distributee.
(e) A dissolved nonprofit corporation that published a notice under this section may file an application with the circuit court for the county in which the dissolved nonprofit corporation’s principal office is located in this state and if the dissolved nonprofit corporation does not have a principal office within this state, with the circuit court for the county in which the dissolved nonprofit corporation’s most recent registered office is located, for a determination of the amount and form of security to be provided for payment of claims that are contingent or have not been made known to the dissolved nonprofit corporation or that are based on an event occurring after the effective date of the dissolution of the nonprofit corporation but that, based on the facts known to the dissolved nonprofit corporation, are reasonably estimated to arise after the effective date of the dissolution of the nonprofit corporation. Provision need not be made for any claim that is or is reasonably anticipated to be barred under subsection (c).
(f) Within 10 days after the filing of the application provided for in subsection (e), notice of the proceeding shall be given by the dissolved nonprofit corporation to each potential claimant as described in subsection (e).
(g) The circuit court under subsection (e) may appoint a guardian ad litem to represent all claimants whose identities are unknown in any proceeding brought under this section. The reasonable fees and expenses of the guardian, including all reasonable expert witness fees, shall be paid by the dissolved nonprofit corporation.
(h) Provision by the dissolved nonprofit corporation for security in the amount and the form ordered by the circuit court under subsection (e) shall satisfy the dissolved nonprofit corporation’s obligation with respect to claims that are contingent, have not been made known to the dissolved nonprofit corporation, or are based on an event occurring after the effective date of the dissolution of the nonprofit corporation, and those claims may not be enforced against a distributee to whom assets have been distributed by the dissolved nonprofit corporation after the effective date of the dissolution of the nonprofit corporation.
(i) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(j) If a claim has been satisfied, disposed of, or barred under Section 10A-3A-11.08, this section, or other law, the person or persons designated to wind up the affairs of a dissolved nonprofit corporation, and the distributees receiving assets from the dissolved nonprofit corporation, shall not be liable for that claim.
(Act 2023-503, §1.)
(a) Directors shall cause the dissolved nonprofit corporation to discharge or make reasonable provision for the payment of claims and make distributions in liquidation of assets to the persons designated to receive the assets of the dissolved nonprofit corporation after payment or provision for claims.
(b) Directors of a dissolved nonprofit corporation which has disposed of claims under Section 10A-3A-11.08 or Section 10A-3A-11.09 shall not be liable for breach of subsection (a) with respect to claims against the dissolved nonprofit corporation that are barred or satisfied under Section 10A-3A-11.08 or Section 10A-3A-11.09.
(Act 2023-503, §1.)
The circuit court for the county in which the nonprofit corporation’s principal office is located in this state, and if none in this state, the circuit court for the county in which the nonprofit corporation’s most recent registered office is located may dissolve a nonprofit corporation:
(1) in a proceeding by the Attorney General if it is established that:
(i) the nonprofit corporation obtained its certificate of incorporation through fraud; or
(ii) the nonprofit corporation has continued to exceed or abuse the authority conferred upon it by law;
(2) in a proceeding by a director, or members holding at least 25 percent of the aggregate voting power of all of the members entitled to vote on dissolution, unless the certificate of incorporation reduces or eliminates that percentage requirement, if it is established that:
(i) the directors are deadlocked in the management of the corporate affairs, the members, if any, are unable to break the deadlock, and irreparable injury to the nonprofit corporation or its mission is threatened or being suffered, because of the deadlock;
(ii) the directors or those in control of the nonprofit corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent;
(iii) the members are deadlocked in voting power and have failed, for a period that includes at least two consecutive annual meeting dates, to elect successors to directors whose terms have expired;
(iv) the corporate assets are being misapplied or wasted;
(v) the nonprofit corporation has insufficient assets to continue its activities and affairs;
(vi) the nonprofit corporation is not able to assemble a quorum of directors or members; or
(vii) the nonprofit corporation has abandoned its activities and affairs and has failed within a reasonable time to liquidate and distribute its assets and dissolve; or
(3) in a proceeding by a creditor if it is established that:
(i) the creditor’s claim has been reduced to judgment, the execution on the judgment returned unsatisfied, and the nonprofit corporation is insolvent; or
(ii) the nonprofit corporation has admitted in writing that the creditor’s claim is due and owing and the nonprofit corporation is insolvent;
(4) in a proceeding by the nonprofit corporation to have its voluntary dissolution continued under court supervision; or
(5) in a proceeding by an interested person, as determined by the court, if it is established that:
(i) there is not at least one member or director of the nonprofit corporation; and
(ii) a member or director cannot be elected in accordance with the certificate of incorporation or bylaws of the nonprofit corporation.
(Act 2023-503, §1.)
(a) Venue for a proceeding by the Attorney General to dissolve a nonprofit corporation lies in circuit court for the county in which the nonprofit corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the nonprofit corporation’s most recent registered office is located. Venue for a proceeding brought by any other party named in Section 10A-3A-11.20 lies in circuit court for the county in which the nonprofit corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the nonprofit corporation’s most recent registered office is located.
(b) It is not necessary to make members or directors parties to a proceeding to dissolve a nonprofit corporation unless relief is sought against them individually.
(c) A court in a proceeding brought to dissolve a nonprofit corporation may issue injunctions, appoint a receiver or custodian during the proceeding with all powers and duties the court directs, take other action required to preserve the corporate assets wherever located, and carry on the activities and affairs of the nonprofit corporation until a full hearing can be held.
(Act 2023-503, §1.)
(a) A court in a judicial proceeding brought to dissolve a nonprofit corporation may (i) appoint one or more receivers to wind up and liquidate, (ii) appoint one or more custodians to manage the activities and affairs of the nonprofit corporation, or (iii) appoint one or more custodians to determine whether the nonprofit corporation should be dissolved. The court shall hold a hearing, after notifying all parties to the proceeding and any interested persons designated by the court, before appointing a receiver or custodian. The court appointing a receiver or custodian has jurisdiction over the nonprofit corporation and all of its property wherever located.
(b) The court may appoint an individual, nonprofit corporation, or other entity as a receiver or custodian, which, if a foreign entity, must be registered to do business in this state. The court may require the receiver or custodian to post bond, with or without sureties, in an amount the court directs.
(c) The court shall describe the powers and duties of the receiver or custodian in its appointing order, which may be amended from time to time. Among other powers:
(1) the receiver: (i) may dispose of all or any part of the assets of the nonprofit corporation wherever located, at a public or private sale; and (ii) may sue and defend in the receiver’s own name as receiver of the nonprofit corporation in all courts of this state.
(2) the custodian may exercise all of the powers of the nonprofit corporation, through or in place of its board of directors, to the extent necessary to manage the affairs of the nonprofit corporation in the best interests of the mission of the nonprofit corporation and in the best interests of the nonprofit corporation, its members, if any, and creditors.
(3) in lieu of dissolution, the court may authorize a custodian in a proceeding brought under Section 10A-3A-11.20, to determine whether the nonprofit corporation should be dissolved. If the custodian determines that the nonprofit corporation should not be dissolved, the custodian shall prepare and present to the court a plan of operation which shall set forth:
(i) the reasons that it is in the best interest of the nonprofit corporation to continue its activities and affairs and not be dissolved;
(ii) that the continuation of the activities and affairs of the nonprofit corporation will not be in contravention of the certificate of incorporation or bylaws of the nonprofit corporation;
(iii) any amendments to the certificate of incorporation or bylaws necessary for the nonprofit corporation to continue its activities and affairs in accordance with the plan of operation;
(iv) for a membership nonprofit corporation that does not have any members, the name of at least one person proposed to be a member; and
(v) for a nonmembership nonprofit corporation that does not have any directors, the name of at least one person proposed to be a director.
(4) the receiver or custodian shall have any other powers and duties as the court may provide in the appointing order, which may be amended from time to time.
(d) The court during a receivership may redesignate the receiver a custodian and during a custodianship may redesignate the custodian a receiver.
(e) The court from time to time during the receivership or custodianship may order compensation paid and expenses paid or reimbursed to the receiver or custodian from the assets of the nonprofit corporation or proceeds from the sale of the assets.
(Act 2023-503, §1.)
(a) If after a hearing the court determines that one or more grounds for judicial dissolution described in Section 10A-3A-11.20 exist, the court may enter a decree dissolving the nonprofit corporation and specifying the effective date of the dissolution. If the court enters a decree dissolving the nonprofit corporation, then the clerk of the court shall deliver a certified copy of the decree to the Secretary of State for filing.
(b) After entering the decree of dissolution, the court shall direct the winding up and liquidation of the nonprofit corporation’s activities and affairs in accordance with Section 10A-3A-11.07 and the notification of claimants in accordance with Sections 10A-3A-11.08 and 10A-3A-11.09.
(c) If after a hearing the court determines pursuant to Section 10A-3A-11.22(c)(3) that a nonprofit corporation should not be dissolved, but should continue its activities and affairs, the court shall issue a decree naming at least one person as a member of the nonprofit corporation if it is a membership nonprofit corporation, naming at least one director if the nonprofit corporation is a nonmembership nonprofit corporation, and such other matters as the court may determine. If the court approves an amendment to the certificate of incorporation in accordance with Section 10A-3A-11.22(c)(3), then the court’s decree shall also set forth that amendment, specifying the effective date of that amendment, and the clerk of the court shall deliver a certified copy of the decree to the Secretary of State for filing.
(Act 2023-503, §1.)
Assets of a dissolved nonprofit corporation that should be transferred to a creditor, claimant, or a person designated to receive the assets of the nonprofit corporation who cannot be found or who is not competent to receive them shall be reduced to cash and deposited with the State Treasurer or other appropriate state official for safekeeping. When the creditor, claimant, or person designated to receive the assets of the nonprofit corporation furnishes satisfactory proof of entitlement to the amount deposited, the State Treasurer or other appropriate state official shall pay that person or that person’s representative that amount.
(Act 2023-503, §1.)
As used in this article, unless the context otherwise requires, the following terms mean:
(1) CONSTITUENT CORPORATION means a constituent organization that is a nonprofit corporation.
(2) CONSTITUENT ORGANIZATION means an organization that is party to a merger under this article.
(3) GOVERNING STATUTE of an organization means the statute that governs the organization’s internal affairs.
(4) ORGANIZATION means a general partnership, including a limited liability partnership; limited partnership, including a limited liability limited partnership; limited liability company; business trust; business corporation; nonprofit corporation; professional corporation; or any other person having a governing statute. The term includes domestic and foreign organizations whether or not organized for profit.
(5) ORGANIZATIONAL DOCUMENTS means:
(A) for a general partnership or foreign general partnership, its partnership agreement and if applicable, its registration as a limited liability partnership or a foreign limited liability partnership;
(B) for a limited partnership or foreign limited partnership, its certificate of formation and partnership agreement, or comparable writings as provided in its governing statute;
(C) for a limited liability company or foreign limited liability company, its certificate of formation and limited liability company agreement, or comparable writings as provided in its governing statute;
(D) for a business or statutory trust or foreign business or statutory trust its agreement of trust and declaration of trust, or comparable writings as provided in its governing statute;
(E) for a business corporation or foreign business corporation, its certificate of incorporation, bylaws, and other agreements among its stockholders that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(F) for a nonprofit corporation or foreign nonprofit corporation, its certificate of incorporation, bylaws, and other agreements that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(G) for a professional corporation or foreign professional corporation, its certificate of incorporation, bylaws, and other agreements among its stockholders that are authorized by its governing statute, or comparable writings as provided in its governing statute; and
(H) for any other organization, the basic writings that create the organization and determine its internal governance and the relations among the persons that own it, have an interest in it, or are members of it.
(6) PLAN OF MERGER. Except as set forth in Section 10A-3A-12.02(g), a plan of merger, whether referred to as a plan of merger, an agreement of merger, a merger agreement, a plan and agreement of merger, an agreement and plan of merger, or otherwise, means a writing described in Section 10A-3A-12.02 and includes any agreement, instrument, or other document referenced therein or associated therewith that sets forth the terms and conditions of the merger.
(7) SURVIVING ORGANIZATION means an organization into which one or more other organizations are merged under this article, whether the organization pre-existed the merger or was created pursuant to the merger.
(Act 2023-503, §1; Act 2025-281, §3.)
(a) A nonprofit corporation may merge with one or more other constituent organizations pursuant to this article, and a plan of merger, if:
(1) the governing statute of each of the other organizations authorizes the merger;
(2) the merger is not prohibited by the law of a jurisdiction that enacted any of those governing statutes; and
(3) each of the other organizations complies with its governing statute in effecting the merger.
(b) A plan of merger must be in writing and must include:
(1) the name, type of organization, and mailing address of the principal office of each constituent organization, the jurisdiction of the governing statute of each constituent organization, and the respective unique identifying number or other designation as assigned by the Secretary of State, if any, of each constituent organization;
(2) the name, type of organization, and mailing address of the principal office of the surviving organization, the unique identifying number or other designation as assigned by the Secretary of State, if any, of the surviving organization, the jurisdiction of the governing statute of the surviving organization, and, if the surviving organization is created pursuant to the merger, a statement to that effect;
(3) the terms and conditions of the merger, including the manner and basis for converting the interests in each constituent organization into any combination of money, securities, interests in the surviving organization, and other consideration as allowed by subsection (c);
(4) if the surviving organization is to be created pursuant to the merger, the surviving organization’s organizational documents; and
(5) if the surviving organization is not to be created pursuant to the merger, any amendments to be made by the merger to the surviving organization’s organizational documents.
(c) In connection with a merger, rights, securities, or interests, if any, in a constituent organization may be exchanged for or converted into cash, property, rights, securities, or interests, if any, in the surviving organization, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, rights, securities, or interests, if any, in another organization, or may be cancelled.
(d) In addition to the requirements of subsection (b), a plan of merger may contain any other provision not prohibited by law.
(e) Terms of a plan of merger may be made dependent on facts objectively ascertainable outside the plan in accordance with Section 10A-3A-1.04(c)(5).
(f) A plan of merger may be amended only with the consent of each constituent organization, except as provided in the plan. A domestic constituent organization may approve an amendment to a plan:
(1) in the same manner as the plan was approved, if the plan does not provide for the manner in which it may be amended; or
(2) in the manner provided in the plan, except that if the plan has been approved by the interest holders that were entitled to vote on, consent to, or approve of, the plan, then those interest holders are entitled to vote on, consent to, or approve of any amendment of the plan that will change:
(i) the amount or kind of securities, interests, obligations, rights to acquire other interests or securities, cash, or other property to be received under the plan by the interest holders of a constituent organization;
(ii) the certificate of incorporation of any nonprofit corporation, foreign nonprofit corporation, business corporation, or foreign business corporation, or the organizational documents of any other organization, that will be the surviving organization, except for changes permitted by Section 10A-3A-9.03(g) or by comparable provisions of the governing statute of the foreign nonprofit corporation, business corporation, foreign business corporation, or other organization; or
(iii) any of the other terms or conditions of the plan if the change would adversely affect the interest holders in any material respect.
(g) At the time of the approval of the plan of merger in accordance with this chapter, the plan of merger is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of merger that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of merger.
(Act 2023-503, §1; Act 2025-281, §3.)
In the case of a membership nonprofit corporation that is a constituent organization, the plan of merger shall be adopted in the following manner:
(a) The plan of merger shall first be adopted by the board of directors.
(b) Except as provided in subsection (h), the plan of merger shall then be approved by the members entitled to vote thereon. In submitting the plan of merger to the members for approval, the board of directors shall recommend that the members approve the plan of merger, unless the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make a recommendation, in which case the board of directors shall inform the members of the basis for its so proceeding.
(c) The board of directors may set conditions for the approval of the plan of merger by the members or the effectiveness of the plan of merger.
(d) If the plan of merger is required to be approved by the members, and if the approval is to be given at a meeting, the membership nonprofit corporation shall notify each member who is entitled to vote, of the meeting of the members at which the plan of merger is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the plan of merger and must contain or be accompanied by a copy or summary of the plan of merger. If the membership nonprofit corporation is to be merged into an existing nonprofit corporation; foreign nonprofit corporation, or other organization, the notice must also include or be accompanied by a copy or summary of the certificate of incorporation and bylaws or the organizational documents of that nonprofit corporation, foreign nonprofit corporation, or other organization. If the membership nonprofit corporation is to be merged with a nonprofit corporation, foreign nonprofit corporation, or other organization and a new nonprofit corporation, foreign nonprofit corporation, or organization is to be created pursuant to the merger, the notice must include or be accompanied by a copy or a summary of the certificate of incorporation and bylaws or the organizational documents of the new nonprofit corporation, foreign nonprofit corporation, or other organization.
(e) Unless the certificate of incorporation, or the board of directors acting pursuant to subsection (c), requires a greater vote or a greater quorum, approval of the plan of merger requires the approval of the members entitled to vote at a meeting at which a quorum exists consisting of a majority of the votes entitled to be cast on the plan of merger, and, if any class of membership interests entitled to vote as a separate group on the plan of merger, the approval of each separate voting group at a meeting at which a quorum of the voting group is present consisting of a majority of the votes entitled to be cast on the merger by that voting group.
(f) Subject to subsection (g), separate voting by voting groups is required:
(1) on a plan of merger, by each class of membership interests that:
(i) are to be converted under the plan of merger into securities, interests, obligations, rights to acquire other securities or interests, cash, other property, or any combination of the foregoing; or
(ii) are entitled to vote as a separate group on a provision in the plan of merger that constitutes a proposed amendment to the certificate of incorporation of a surviving nonprofit corporation that requires action by separate voting groups under Section 10A-3A-9.04; and
(2) on a plan of merger, if the voting group is entitled under the certificate of incorporation or bylaws to vote as a voting group to approve a plan of merger, respectively.
(g) The certificate of incorporation may expressly limit or eliminate the separate voting rights provided in subsection (f)(1)(i) and subsection (f)(2) as to any class of membership, except when the plan of merger includes what is or would be in effect an amendment subject to subsection (f)(1)(ii).
(h) Unless the certificate of incorporation otherwise provides, approval by the membership nonprofit corporation’s members of a plan of merger is not required if:
(1) the membership nonprofit corporation will survive the merger;
(2) except for amendments that do not require member approval under Section 10A-3A-9.03(g) or the approval of a person or group of persons under Section 10A-3A-9.30, its certificate of incorporation will not be changed;
(3) except for amendments that do not require member approval under Section 10A-3A-9.22 or the approval of a person or group of persons under Section 10A-3A-9.30, its bylaws will not be changed; and
(4) each member of the membership nonprofit corporation whose membership interest was outstanding immediately before the effective date of the merger will hold the same number of membership interests, with identical preferences, rights, and limitations, immediately after the effective date of the merger.
(i) In addition to the adoption and approval of the plan of merger as required by this section, the plan must also be approved in writing by a person or group of persons, if any, whose approval is required under Section 10A-3A-12.08.
(Act 2023-503, §1.)
In the case of a merger of a nonmembership nonprofit corporation the plan of merger shall be adopted in the following manner:
(a) The plan of merger shall be adopted by the board of directors; and
(b) A plan of merger adopted by the board of directors under this section must also be approved in writing by a person or group of persons, if any, whose approval is required under Section 10A-3A-12.08.
(Act 2023-503, §1.)
(a) After a plan of merger has been adopted and approved as required by this article, then a statement of merger shall be signed by each party to the merger. The statement of merger must set forth:
(1) the name, type of organization, and mailing address of the principal office of each constituent organization, the jurisdiction of the governing statute of each constituent organization, and the respective unique identifying number or other designation as assigned by the Secretary of State, if any, of each constituent organization;
(2) the name, type of organization, and mailing address of the principal office of the surviving organization, the unique identifying number or other designation as assigned by the Secretary of State, if any, of the surviving organization, the jurisdiction of the governing statute of the surviving organization, and, if the surviving organization is created pursuant to the merger, a statement to that effect;
(3) the date the merger is effective under the governing statute of the surviving organization;
(4) if the surviving organization is to be created pursuant to the merger:
(A) if it will be a nonprofit corporation, the nonprofit corporation’s certificate of incorporation; or
(B) if it will be an organization other than a nonprofit corporation, any organizational document that creates the organization that is required to be in a public writing or in the case of a limited liability partnership, its statement of limited liability partnership;
(5) if the surviving organization exists before the merger, any amendments provided for in the plan of merger for the organizational document that created the organization that are in a public writing;
(6) a statement as to each constituent organization that the merger was approved as required by the organization’s governing statute;
(7) if the surviving organization is a foreign organization not authorized to conduct activities and affairs in this state, the street and mailing address of an office for the purposes of Section 10A-3A-12.06(b);
(8) any additional information required by the governing statute of any constituent organization;
(9) if the plan of merger required approval by the members of a membership nonprofit corporation that is a constituent organization, a statement that the plan was duly approved by the members and, if voting by any separate voting group was required, by each separate voting group, in the manner required by this chapter, the certificate of incorporation or bylaws;
(10) if the plan of merger required approval by a person or group of persons as specified in the certificate of incorporation pursuant to Section 10A-3A-12.08, a statement that the plan was duly approved by that person or group of persons;
(11) if the plan of merger did not require approval by the members of a membership nonprofit corporation that is a constituent organization, a statement to that effect; and
(12) a statement that the plan of merger will be furnished by the surviving organization, on request and without cost, to any member or owner of any constituent organization which is a party to the merger.
(b) In addition to the requirements of subsection (a), a statement of merger may contain any other provision not prohibited by law.
(c) The statement of merger shall be delivered to the Secretary of State for filing and, subject to subsection (d), the merger shall take effect at the effective date and time determined in accordance with Article 4 of Chapter 1.
(d) With respect to a merger in which one or more foreign organizations is a constituent organization or a foreign organization created by the merger is the surviving organization, the merger itself shall become effective at the later of:
(1) when all documents required to be filed in foreign jurisdictions to effect the merger have become effective, or
(2) when the statement of merger takes effect.
(e) A statement of merger filed under this section may be combined with any filing required under the governing statute governing any domestic organization involved in the transaction if the combined filing satisfies the requirements of this section, the other governing statute, and Article 4 of Chapter 1.
(f) A certified copy of the statement of merger required to be filed under this section may be filed in the real estate records in the office of the judge of probate in any county in which any constituent organization owned real property, without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate, however, shall be entitled to collect the filing fee of five dollars ($5). Any filing shall evidence chain of title, but lack of filing shall not affect the surviving organization’s title to real property.
(g) A statement of conversion is a filing instrument under Chapter 1.
(h) The filing fees for a statement of conversion shall be as set forth in Chapter 1.
(Act 2023-503, §1.)
(a) When a merger becomes effective:
(1) the surviving organization continues or, in the case of a surviving organization created pursuant to the merger, comes into existence;
(2) each constituent organization that merges into the surviving organization ceases to exist as a separate entity;
(3) except as provided in the plan of merger, all property owned by, and every contract right possessed by, each constituent organization that ceases to exist vests in the surviving organization without transfer, reversion, or impairment and the title to any property and contract rights vested by deed or otherwise in the surviving organization shall not revert, be in any way impaired, or be deemed to be a transfer by reason of the merger;
(4) all debts, obligations, and other liabilities of each constituent organization, other than the surviving organization, are debts, obligations, and liabilities of the surviving organization, and neither the rights of creditors, nor any liens upon the property of any constituent organization, shall be impaired by the merger;
(5) an action or proceeding pending by or against any constituent organization continues as if the merger had not occurred and the name of the surviving organization may, but need not be, substituted in any pending proceeding for the name of any constituent organization whose separate existence ceased in the merger;
(6) except as prohibited by law other than this chapter or as provided in the plan of merger, all the rights, privileges, franchises, immunities, powers, and purposes of each constituent organization, other than the surviving organization, vest in the surviving organization;
(7) except as otherwise provided in the plan of merger, the terms and conditions of the plan of merger take effect;
(8) except as otherwise agreed, if a constituent organization that is a nonprofit corporation ceases to exist, the merger does not dissolve the nonprofit corporation;
(9) if the surviving organization is created pursuant to the merger:
(A) if it is a nonprofit corporation, the certificate of incorporation and bylaws become effective; or
(B) if it is an organization other than a nonprofit corporation, the organizational documents that create the organization becomes effective;
(10) if the surviving organization existed before the merger, any amendments provided for in the statement of merger for the organizational documents of that organization become effective;
(11) the membership interests, if any, of each nonprofit corporation or foreign nonprofit corporation that is a constituent organization to the merger, and the interests in an organization that is a constituent organization, that are to be converted in accordance with the terms of the merger into securities, interests, obligations, rights to acquire other securities or interests, cash, other property, or any combination of the foregoing, are converted, and the former holders of membership interests, if any, or interests are entitled only to the rights provided to them by those terms or to any rights they may have under the governing statute governing that constituent organization;
(12) if the surviving organization exists before the merger:
(A) except as provided in the plan of merger, all property and contract rights of the surviving organization remain its property and contract rights without transfer, reversion, or impairment;
(B) the surviving organization remains subject to all its debts, obligations, and other liabilities; and
(C) except as provided by law other than this chapter or the plan of merger, the surviving organization continues to hold all of its rights, privileges, franchises, immunities, powers, and purposes.
(b) A surviving organization that is a foreign organization:
(1) consents to the jurisdiction of this state to enforce any debt, obligation, or other liability owed by a constituent organization, if before the merger the constituent organization was subject to suit in this state on the debt, obligation, or other liability; and
(2) consents that if it fails to designate or maintain a registered agent, or the designated registered agent cannot with reasonable diligence be served, then the service of process on that surviving organization for the purposes of enforcing a debt, obligation, or other liability under this subsection and for enforcing the rights, if any, of members of each nonprofit corporation that is a constituent organization may be made in the same manner and has the same consequences as provided in Section 10A-1-5.35.
(Act 2023-503, §1.)
(a) After a plan of merger has been adopted and approved as required by this Article 12, and before the statement of merger has become effective, the plan may be abandoned by a nonprofit corporation that is a party to the plan without action by its members, if any, or a person or group of persons under Section 10A-3A-12.08, if any, in accordance with any procedures set forth in the plan of merger or, if no procedures are set forth in the plan, in the manner determined by the board of directors.
(b) If a merger is abandoned under subsection (a) after the statement of merger has been delivered to the Secretary of State for filing but before the merger has become effective, a statement of abandonment signed by all the parties that signed the statement of merger shall be delivered to the Secretary of State for filing before the statement of merger becomes effective. The statement shall take effect on filing and the merger shall be deemed abandoned and shall not become effective. The statement of abandonment must contain:
(1) the name of each party to the merger;
(2) the date on which the statement of merger was filed by the Secretary of State; and
(3) a statement that the merger has been abandoned in accordance with this section.
(Act 2023-503, §1.)
(a) The certificate of incorporation of a membership nonprofit corporation may require that a merger under this article or under Article 8 of Chapter 1 be approved in writing by a specified person or group of persons in addition to the board of directors and members.
(b) The certificate of incorporation of a nonmembership nonprofit corporation may require that a merger under this article or under Article 8 of Chapter 1 be approved in writing by a specified person or group of persons in addition to the board of directors.
(c) A requirement in the certificate of incorporation described in subsections (a) or (b) of this section may only be approved by the written approval of the specified person or group of persons.
(Act 2023-503, §1.)
This article is not exclusive. This article does not preclude a nonprofit corporation from merging under law other than this chapter.
(Act 2023-503, §1.)
As used in this article, unless the context otherwise requires, the following terms mean:
(1) CONVERTED ORGANIZATION means the organization into which a converting organization converts pursuant to this article.
(2) CONVERTING NONPROFIT CORPORATION means a converting organization that is a nonprofit corporation.
(3) CONVERTING ORGANIZATION means an organization that converts into another organization pursuant to this article.
(4) GOVERNING STATUTE of an organization means the statute that governs the organization’s internal affairs.
(5) ORGANIZATION means a general partnership, including a limited liability partnership; limited partnership, including a limited liability limited partnership; limited liability company; business trust; business corporation; nonprofit corporation; professional corporation; or any other person having a governing statute. The term includes domestic and foreign organizations whether or not organized for profit.
(6) ORGANIZATIONAL DOCUMENTS means:
(A) for a general partnership or foreign general partnership, its partnership agreement and if applicable, its registration as a limited liability partnership or a foreign limited liability partnership;
(B) for a limited partnership or foreign limited partnership, its certificate of formation and partnership agreement, or comparable writings as provided in its governing statute;
(C) for a limited liability company or foreign limited liability company, its certificate of formation and limited liability company agreement, or comparable writings as provided in its governing statute;
(D) for a business or statutory trust or foreign business or statutory trust, its agreement of trust and declaration of trust, or comparable writings as provided in its governing statute;
(E) for a business corporation or foreign business corporation, its certificate of incorporation, bylaws, and other agreements among its stockholders that are authorized by its governing statute or comparable writings as provided in its governing statute;
(F) for a nonprofit corporation or foreign nonprofit corporation, its certificate of incorporation, bylaws, and other agreements that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(G) for a professional corporation or foreign professional corporation, its certificate of incorporation, bylaws, and other agreements among its stockholders that are authorized by its governing statute or comparable writings as provided in its governing statute; and
(H) for any other organization, the basic writings that create the organization and determine its internal governance and the relations among the persons that own it, have an interest in it, or are members of it.
(Act 2023-503, §1.)
(a) An organization other than a nonprofit corporation may convert to a nonprofit corporation, and a nonprofit corporation may convert to an organization other than a nonprofit corporation pursuant to this article, and a plan of conversion, if:
(1) the governing statute of the organization that is not a nonprofit corporation authorizes the conversion;
(2) the law of the jurisdiction governing the converting organization and the converted organization does not prohibit the conversion; and
(3) the converting organization and the converted organization each comply with the governing statute and organizational documents applicable to that organization in effecting the conversion.
(b) A plan of conversion must be in writing and must include:
(1) the name, type of organization, and mailing address of the principal office of the converting organization and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;
(2) the name, type of organization, and mailing address of the principal office of the converted organization after conversion;
(3) the terms and conditions of the conversion, including the manner and basis for converting interests, if any, in the converting organization into any combination of money, interests in the converted organization, and other consideration allowed in subsection (c); and
(4) the organizational documents of the converted organization.
(c) In connection with a conversion, rights or securities of or interests, if any, in the converting organization may be exchanged for or converted into cash, property, or rights or securities of or interests, if any, in the converted organization, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, rights, securities, or interests, if any, in another organization, or may be cancelled.
(d) In addition to the requirements of subsection (b), a plan of conversion may contain any other provision not prohibited by law.
(e) Terms of a plan of conversion may be made dependent on facts objectively ascertainable outside the plan in accordance with Section 10A-3A-1.04(c).
(f) At the time of the approval of the plan of conversion in accordance with this chapter, the plan of conversion is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of conversion that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of conversion.
(Act 2023-503, §1; Act 2025-281, §3.)
In the case of a conversion of a membership nonprofit corporation the plan of conversion shall be adopted in the following manner:
(a) The plan of conversion shall first be adopted by the board of directors.
(b) The plan of conversion shall then be approved by the members entitled to vote thereon. In submitting the plan of conversion to the members for their approval, the board of directors must recommend that the members approve the plan of conversion, unless the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make a recommendation, in which case the board of directors shall inform the members of the basis for its so proceeding.
(c) The board of directors may set conditions for the approval of the plan of conversion by the members or the effectiveness of the plan of conversion.
(d) If the approval of the members is to be given at a meeting, the nonprofit corporation shall notify each member entitled to vote of the meeting of members at which the plan of conversion is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the plan of conversion and must contain or be accompanied by a copy or summary of the plan of conversion. The notice must include or be accompanied by a copy of the organizational documents of the converted organization which are to be in writing as they will be in effect immediately after the conversion.
(e) Unless the certificate of incorporation or the board of directors acting pursuant to subsection (c), requires a greater vote or a greater quorum, approval of the plan of conversion requires (i) the approval of the members entitled to vote at a meeting at which a quorum exists consisting of a majority of the votes entitled to be cast on the plan of conversion, and (ii) the approval of each class of members voting as a separate voting group at a meeting at which a quorum of the voting group exists consisting of a majority of the votes entitled to be cast on the plan of conversion by that voting group.
(f) In addition to the adoption and approval of the plan of conversion as required by this section, the plan of conversion must also be approved in writing by a person or group of persons, if any, whose approval is required under Section 10A-3A-13.08.
(Act 2023-503, §1.)
In the case of a conversion of a nonmembership nonprofit corporation the plan of conversion shall be adopted in the following manner:
(a) The plan of conversion shall be adopted by the board of directors; and
(b) A plan of conversion adopted by the board of directors under this section must also be approved in writing by a person or group of persons, if any, whose approval is required under Section 10A-3A-13.08.
(Act 2023-503, §1.)
(a) After a plan of conversion is approved:
(1) if the converting organization is an organization formed under, or its internal affairs are governed by, the laws of this state, the converting organization shall file a statement of conversion in accordance with subsection (c), which statement of conversion must be signed in accordance with Section 10A-1-4.01 and which must include:
(A) the name, type of organization, and mailing address of the principal office of the converting organization, and its unique identifying number or other designation as assigned by the Secretary of State, if any;
(B) a statement that the converting organization has been converted into the converted organization;
(C) the name and type of organization of the converted organization and the jurisdiction of its governing statute;
(D) the street and mailing address of the principal office of the converted organization;
(E) the date the conversion is effective under the governing statute of the converted organization;
(F) a statement that the conversion was approved as required by this chapter;
(G) a statement that the conversion was approved as required by the governing statute of the converted organization;
(H) a statement that a copy of the plan of conversion will be furnished by the converted organization, on request and without cost, to any owner of the converting organization; and
(I) if the converted organization is a foreign organization not authorized to conduct activities and affairs in this state, the street and mailing address of an office for the purposes of Section 10A-3A-13.07(b); and
(2) if the converted organization is a nonprofit corporation, the converting organization shall deliver for filing a certificate of incorporation in accordance with subsection (d), which certificate of incorporation must include, in addition to the information required by Section 10A-3A-2.02:
(A) a statement that the nonprofit corporation was converted from the converting organization;
(B) the name and type of organization of the converting organization, the jurisdiction of the converting organization’s governing statute, and the converting organization’s unique identifying number or other designation as assigned by the Secretary of State, if any; and
(C) a statement that the conversion was approved in a manner that complied with the converting organization’s governing statute.
(b) A conversion becomes effective:
(1) if the converted organization is a nonprofit corporation, when the certificate of incorporation takes effect; and
(2) if the converted organization is not a nonprofit corporation, as provided by the governing statute of the converted organization.
(c) If the converting organization is an organization formed under, or its internal affairs are governed by, the laws of this state, then the converting organization shall deliver for filing the statement of conversion required under subsection (a)(1) to the Secretary of State.
(d) If the converted organization is a nonprofit corporation, then, the converting organization shall deliver for filing the certificate of incorporation required under subsection (a)(2) to the Secretary of State.
(e) If the converting organization is required to deliver for filing a statement of conversion and a certificate of formation or a certificate of incorporation to the Secretary of State, then the converting organization shall deliver for filing the statement of conversion and the certificate of formation or certificate of incorporation to the Secretary of State simultaneously.
(f) If:
(1) the converting organization is a filing entity or a foreign filing entity registered to conduct activities and affairs in this state;
(2) the converted organization will be a filing entity or a foreign filing entity registered to conduct activities and affairs in this state;
(3) the name of the converting organization and the converted organization are to be the same, other than words, phrases, or abbreviations indicating the type of entity; and
(4) the name of the converted organization complies with Division A of Article 5 of Chapter 1 or Section 10A-1-7.07, as the case may be; then notwithstanding Division B of Article 5 of Chapter 1, no name reservation shall be required and the converted organization shall for all purposes of this title be entitled to utilize the name of the converting organization without any further action by the converting organization or the converted organization.
(g) A certified copy of any document required to be filed under this section may be filed in the real estate records in the office of the judge of probate in any county in which the converting organization owned real property, without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate shall, however, be entitled to collect a filing fee of five dollars ($5). Any such filing with the judge of probate shall evidence chain of title, but lack of filing shall not affect the converted organization’s title to such real property.
(h) A statement of conversion is a filing instrument under Chapter 1.
(i) The filing fees for a statement of conversion shall be as set forth in Chapter 1.
(Act 2023-503, §1.)
(a) A plan of conversion of a converting organization that is a nonprofit corporation may be amended:
(1) in the same manner as the plan was approved, if the plan does not provide for the manner in which it may be amended; or
(2) in the manner provided in the plan, except that if the plan has been approved by the members that were entitled to vote on, consent to, or approve of the plan, then those members are entitled to vote on, consent to, or approve of any amendment of the plan that will change:
(i) the amount or kind of interests, if any, or other securities, obligations, rights to acquire interests, if any, or other securities, cash, other property, or any combination of the foregoing, to be received by the members, if any, of the converting nonprofit corporation under the plan;
(ii) the organizational documents of the converted organization that will be in effect immediately after the conversion becomes effective, except for changes that do not require approval of the interest holders of the converted organization under its governing statute or organizational documents; or
(iii) any other terms or conditions of the plan, if the change would adversely affect the members in any material respect.
(b) After a plan of conversion has been approved by a converting organization that is a nonprofit corporation in the manner required by this article and before the statement of conversion becomes effective, the plan may be abandoned by the nonprofit corporation without action by its members, if any, or a person or group of persons under Section 10A-3A-13.08, in accordance with any procedures set forth in the plan or, if no procedures are set forth in the plan, in the manner determined by the board of directors.
(c) If a conversion is abandoned after the statement of conversion has been delivered to the Secretary of State for filing and before the statement of conversion becomes effective, a statement of abandonment, signed by the converting organization, must be delivered to the Secretary of State for filing before the statement of conversion becomes effective. The statement of abandonment takes effect on filing, and the conversion is abandoned and does not become effective. The statement of abandonment must contain:
(1) the name of the converting organization;
(2) the date on which the statement of conversion was filed by the Secretary of State; and
(3) a statement that the conversion has been abandoned in accordance with this section.
(Act 2023-503, §1.)
(a) When a conversion takes effect:
(1) all property and contract rights owned by the converting organization remain vested in the converted organization without transfer, reversion, or impairment, and the title to any property vested by deed or otherwise in the converting organization shall not revert or be in any way impaired by reason of the conversion;
(2) all debts, obligations, or other liabilities of the converting organization continue as debts, obligations, or other liabilities of the converted organization and neither the rights of creditors, nor the liens upon the property of the converting organization shall be impaired by the conversion;
(3) an action or proceeding pending by or against the converting organization continues as if the conversion had not occurred and the name of the converted organization may, but need not, be substituted for the name of the converting organization in any pending action or proceeding;
(4) except as prohibited by law other than this chapter, all of the rights, privileges, immunities, powers, and purposes of the converting organization remain vested in the converted organization;
(5) except as otherwise provided in the plan of conversion, the terms and conditions of the plan of conversion take effect;
(6) except as otherwise agreed, for all purposes of the laws of this state, the converting organization shall not be required to wind up its affairs or pay its liabilities and distribute its assets, and the conversion shall not be deemed to constitute a dissolution of the converting organization;
(7) for all purposes of the laws of this state, the rights, privileges, powers, interests in property, debts, liabilities, and duties of the converting organization, shall be the rights, privileges, powers, interests in property, debts, liabilities, and duties of the converted organization, and shall not be deemed as a consequence of the conversion, to have been transferred to the converted organization;
(8) if the converted organization is a nonprofit corporation, for all purposes of the laws of this state, the nonprofit corporation shall be deemed to be the same organization as the converting organization, and the conversion shall constitute a continuation of the existence of the converting organization in the form of a nonprofit corporation;
(9) if the converted organization is a nonprofit corporation, the existence of the nonprofit corporation shall be deemed to have commenced on the date the converting organization commenced its existence in the jurisdiction in which the converting organization was first created, formed, organized, incorporated, or otherwise came into being;
(10) the conversion shall not affect the choice of law applicable to matters arising prior to conversion;
(11) if the Secretary of State has assigned a unique identifying number or other designation to the converting organization and (i) the converted organization is formed pursuant to, or its internal affairs are governed by, the laws of this state, or (ii) the converted organization is, within 30 days after the effective date of the conversion, registered to transact business in this state, then that unique identifying number or other designation shall continue to be assigned to the converted organization; and
(12) the interests, if any, of the converting organization are reclassified into interests or other securities, obligations, rights to acquire interests or other securities, cash, or other property in accordance with the terms of the conversion, and the interest holders, if any, of the converting organization are entitled only to the rights provided to them by those terms and to any rights they may have under the governing statute of the converting organization.
(b) A converted organization that is a foreign entity consents to the jurisdiction of the courts of this state to enforce any debt, obligation, or other liability for which the converting nonprofit corporation, is liable if, before the conversion, the converting nonprofit corporation was subject to suit in this state on the debt, obligation, or other liability. If a converted organization is a foreign entity and fails to designate or maintain a registered agent, or the designated registered agent cannot with reasonable diligence be served, then service of process on that converted organization for the purposes of enforcing a debt, obligation, or other liability under this subsection may be made in the same manner and has the same consequences as provided in Section 10A-1-5.35.
(Act 2023-503, §1.)
(a) The certificate of incorporation of a membership nonprofit corporation may require that a conversion under this article or under Article 8 of Chapter 1 be approved in writing by a specified person or group of persons in addition to the board of directors and members.
(b) The certificate of incorporation of a nonmembership nonprofit corporation may require that a conversion under this article or under Article 8 of Chapter 1 be approved in writing by a specified person or group of persons in addition to the board of directors.
(c) A requirement in the certificate of incorporation described in subsections (a) or (b) of this section may only be approved by the written approval of the specified person or group of persons.
(Act 2023-503, §1.)
This article is not exclusive. This article does not preclude a nonprofit corporation from converting under law other than this chapter.
(Act 2023-503, §1.)
(a) Before January 1, 2025, this chapter governs only:
(1) a nonprofit corporation incorporated on or after January 1, 2024; and
(2) a nonprofit corporation incorporated before January 1, 2024, which elects, by amending or restating that nonprofit corporation’s certificate of incorporation, to be governed by this chapter.
(b) On and after January 1, 2025, this chapter governs all existing nonprofit corporations incorporated under:
(1) any general or special law of this state providing for the incorporation of nonprofit corporations for a purpose or purposes for which a nonprofit corporation might be incorporated under this chapter, where the power has been reserved to amend, repeal, or modify the law under which the nonprofit corporation was incorporated; and
(2) any predecessor statute hereto.
(c) For purposes of applying this chapter to a nonprofit corporation incorporated before January 1, 2024:
(1) the nonprofit corporation is not required to amend its certificate of incorporation to comply with Section 10A-3A-2.02(a)(5); but once amended or restated, the certificate of incorporation must comply with Section 10A-3A-2.02(a)(5);
(2) if on December 31, 2023, the certificate of incorporation or bylaws of a nonprofit corporation in existence on that date provides members with the right to cumulate their votes for the election of directors, that right to cumulate their votes shall continue unless the certificate of incorporation or bylaws of the nonprofit corporation are amended to deny that right. Notwithstanding the foregoing, no such members may cumulate their votes for the election of directors by utilizing an action by written consent.
(3) the nonprofit corporation’s incorporation document, whether a certificate of incorporation, certificate of formation, charter, or articles of incorporation is deemed to be the nonprofit corporation’s certificate of incorporation;
(4) the nonprofit corporation’s bylaws are deemed to be the nonprofit corporation’s bylaws;
(5) any amendment or restatement of a nonprofit corporation’s certificate of incorporation or bylaws on or after January 1, 2024, shall conform with this chapter; and
(d) No nonprofit corporation may be incorporated after December 31, 2023, pursuant to Sections 10A-3-1.01 to 10A-3-8.02, inclusive.
(Act 2023-503, §1.)
A foreign nonprofit corporation registered or authorized to transact business in this state on January 1, 2024, is subject to this chapter and is deemed to be registered to transact business in this state, and is not required to renew its registration to transact business under Article 7 of Chapter 1, except as required by Article 7 of Chapter 1.
(Act 2023-503, §1.)
(a) Except as provided in subsection (b), the repeal of a statute by this chapter does not affect:
(1) the operation of the statute or any action taken under it before its repeal;
(2) any ratification, right, remedy, privilege, obligation, or liability acquired, accrued, or incurred under the statute before its repeal;
(3) any violation of the statute, or any penalty, forfeiture, or punishment incurred because of the violation before its repeal; or
(4) any proceeding, reorganization, or dissolution commenced under the statute before its repeal, and the proceeding, reorganization, or dissolution may be completed in accordance with the statute as if it had not been repealed.
(5) the application of Article 16 of Chapter 20 of this Title to any “officer” and “qualified entity” as such terms are defined in Article 16 of Chapter 20 of this Title.
(b) If a penalty or punishment imposed for violation of a statute repealed by this chapter is reduced by this chapter, the penalty or punishment, if not already imposed, shall be imposed in accordance with this chapter.
(Act 2023-503, §1.)
If any provision of this chapter or its application to any person or circumstance is held invalid by a court of competent jurisdiction, the invalidity does not affect other provisions or applications of this chapter that can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.
(Act 2023-503, §1.)
This chapter modifies, limits, and supersedes the Federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C § 7001 et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C § 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C § 7003(b).
(Act 2023-503, §1.)
A nonprofit corporation formed and existing under this chapter may conduct its activities and affairs, carry on its operations, and have and exercise the powers granted by this chapter in any state, foreign country, or other jurisdiction.
(Act 2023-503, §1.)
A nonprofit corporation governed by this chapter and in existence before August 1, 2026, may elect, on or before December 31, 2026, to amend its certificate of incorporation to state the following: “This nonprofit corporation shall be governed by Chapter 3A of Title 10A, Code of Alabama 1975, as in effect immediately prior to August 1, 2026, and not by any amendments or additions to Chapter 3A of Title 10A, made by Act 2026-495.” The election may be revoked by the nonprofit corporation at any time thereafter by an amendment to the certificate of incorporation which removes that provision from its certificate of incorporation, at which time the nonprofit corporation will be governed by all provisions of this chapter, or any successor law, as in effect as of the date of that amendment, and as amended or replaced thereafter.
(Act 2026-495, §7.)
This chapter and the provisions of Chapter 1, to the extent applicable to professional corporations, may be cited as the Alabama Professional Corporation Law.
(Acts 1983, No. 83-514, p. 763, §1; §10-4-380; amended and renumbered by Act 2009-513, p. 967, §201.)
The provisions of the Alabama Business Corporation Law shall apply to professional corporations, domestic and foreign, except to the extent the provisions are inconsistent with the provisions of this chapter; provided, however, that in the case of nonprofit professional corporations, domestic or foreign, the provisions of the Alabama Nonprofit Corporation Law shall apply except to the extent the provisions are inconsistent with the provisions of this chapter.
(Acts 1983, No. 83-514, p. 763, §2; §10-4-381; amended and renumbered by Act 2009-513, p. 967, §201.)
As used in this chapter, unless the context otherwise requires, the term:
(1) DISQUALIFIED PERSON. Any person who is not a qualified person.
(2) DOMESTIC PROFESSIONAL CORPORATION. A business professional corporation or nonprofit professional corporation organized pursuant to this chapter.
(3) FOREIGN PROFESSIONAL CORPORATION. A corporation or unincorporated association, for profit or nonprofit, organized for the purpose of rendering professional services under a law other than the law of this state.
(4) LICENSING AUTHORITY. As defined in Section 10A-1-1.03.
(5) PROFESSIONAL SERVICE. As defined in Section 10A-1-1.03.
(6) QUALIFIED PERSON. With respect to any domestic professional corporation:
a. An individual who is authorized by law of this state or of any qualified state to render a professional service permitted by the certificate of incorporation of the professional corporation;
b. A general partnership in which all the partners are qualified persons with respect to the professional corporation;
c. A professional corporation, domestic or foreign, in which all the stockholders are qualified persons with respect to the professional corporation; and
d. A limited liability company in which all the members are qualified persons with respect to the professional corporation.
“Qualified person” does not include any person during any period in which the person’s authorization to render professional services has been completely terminated or suspended.
(7) QUALIFIED STATE. Any state, other than this state, or territory of the United States or the District of Columbia which allows individuals authorized to render professional services in this state and not in the other state, or partnerships of the individuals, or domestic professional corporations or professional associations owned by the individuals to own stock in professional corporations or to be members of professional associations organized under its laws.
(Acts 1983, No. 83-514, p. 763, §3; §10-4-382; amended and renumbered by Act 2009-513, p. 967, §201; Act 2024-413, §1.)
A domestic professional corporation may be organized under this chapter for the purpose of, and shall have the power to render, professional services if the domestic professional corporation complies with the rules of the licensing authority for such profession; provided that in the case of a professional corporation, at least one stockholder of the professional corporation is duly licensed to provide each professional service for which the professional corporation is organized, or, in the case of a nonprofit professional corporation, all of the professional services rendered by the professional corporation are rendered by persons duly licensed to render the professional service.
(Acts 1983, No. 83-514, p. 763, §4; Acts 1988, 1st Ex. Sess., No. 88-905, p. 474, §1; §10-4-383; amended and renumbered by Act 2009-513, p. 967, §203; Act 2024-413, §1.)
(a) Any corporation whose certificate of incorporation includes as a stated purpose the performance of professional services may be incorporated under this chapter by stating in its certificate of incorporation that it is incorporated under this chapter.
(b) A domestic professional corporation that is not a nonprofit professional corporation shall cease being governed by this chapter and shall be governed by the Alabama Business Corporation Law if it amends its certificate of incorporation to delete the statement that it is organized under this chapter, and conforms its certificate of incorporation to the Alabama Business Corporation Law. A domestic nonprofit professional corporation shall cease being governed by this chapter and shall be governed by the Alabama Nonprofit Corporation Law if it amends its certificate of incorporation to delete the statement that it is organized under this chapter, and conforms its certificate of incorporation to the Alabama Nonprofit Corporation Law.
(c) Any corporation which is not subject to this chapter may become subject to this chapter, if it is a domestic corporation, by conforming its certificate of incorporation to this chapter.
(d) Any foreign professional corporation which renders professional services in this state shall be subject to this chapter.
(Acts 1983, No. 83-514, p. 763, §5; §10-4-384; amended and renumbered by Act 2009-513, p. 967, §203; Act 2019-94, §2; Act 2024-413, §1.)
(a) Subject to Section 10A-4-5.07, a domestic professional corporation, including a professional corporation that is a nonprofit corporation, shall have all the powers necessary or convenient to effectuate its purposes, including those enumerated in Sections 10A-1-2.11, 10A-1-2.12, and 10A-1-2.13.
(b) A domestic professional corporation shall not engage in any profession other than the profession or professions permitted by its certificate of incorporation, except that a domestic professional corporation may invest its funds in real estate, mortgages, stocks, bonds, or any other type investment.
(Acts 1983, No. 83-514, p. 763, §6; §10-4-385; amended and renumbered by Act 2009-513, p. 967, §203; Act 2024-413, §1.)
A professional corporation, domestic or foreign, may render professional services in this state only through individuals permitted to render the services in this state; but nothing in this chapter shall be construed to require that any individual who is employed by a professional corporation be licensed to perform services for which no license is otherwise required or to prohibit the rendering of professional services by a licensed individual acting in that person’s individual capacity, notwithstanding the individual may be a stockholder, member, director, officer, employee, or agent of a professional corporation, domestic or foreign.
(Acts 1983, No. 83-514, p. 763, §7; §10-4-386; amended and renumbered by Act 2009-513, p. 967, §203; Act 2024-413, §1.)
(a) A domestic professional corporation may issue stock, fractions of a share of stock, and rights or options to purchase stock only to qualified persons.
(b) Where deemed necessary by the licensing authority for any profession in order to prevent violations of the ethical standards of the profession, the licensing authority may, within its rulemaking power, by rule further restrict, condition, or abridge the authority of domestic professional corporations to issue stock, but no rule shall, of itself, have the effect of causing a stockholder of a professional corporation at the time the rule becomes effective to become a disqualified person unless and to the extent specified by the licensing authority.
(c) A stockholder of a domestic professional corporation may transfer or pledge stock, fractions of a share of stock, and rights or options to purchase stock of the professional corporation only to qualified persons.
(d) Any issuance or transfer of stock in violation of this section shall be void, however, nothing contained herein shall prohibit the transfer of stock of a domestic professional corporation by operation of law or court decree.
(e) Nothing in this section shall require domestic nonprofit professional corporations to issue stock. Domestic nonprofit professional corporations may have members and all members must be qualified persons. A licensing authority may, within its rulemaking power, by rule further restrict, condition, or abridge membership in domestic nonprofit corporations, but no rule shall, of itself, have the effect of causing a member of a domestic nonprofit professional corporation at the time the rule becomes effective to become a disqualified person unless and to the extent specified by the licensing authority.
(Acts 1983, No. 83-514, p. 763, §9; §10-4-388; amended and renumbered by Act 2009-513, p. 967, §205; Act 2024-413, §1.)
(a) Upon the death of a stockholder of a domestic professional corporation, upon a stockholder of a domestic professional corporation becoming a disqualified person, or upon stock of a domestic professional corporation being transferred by operation of law or court decree to a disqualified person, the stock owned by the deceased stockholder or the disqualified person may be transferred to a qualified person and, if not so transferred, shall be purchased by the domestic professional corporation as provided in this section.
(b) If the purchase price of the stock is not determined in accordance with the governing documents of the domestic professional corporation or by private agreement, the domestic professional corporation, within six months after the death or 30 days after the disqualification or transfer, as the case may be, shall make a written offer to pay for the stock at a specified price deemed by the domestic professional corporation to be the fair value of the stock as of the date of the death, disqualification, or transfer. The offer shall be delivered to the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, and shall be accompanied by a balance sheet of the domestic professional corporation, as of the latest available date and not more than 12 months prior to the making of the offer, and a profit and loss statement of the domestic professional corporation for the 12 months’ period ended on the date of the balance sheet.
(c) If the fair value of the stock is agreed upon between the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, and the domestic professional corporation, payment therefor shall be made within 90 days after the date of the offer, or other period as the parties may agree. Upon payment of the agreed value the personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, shall cease to have any interest in, or claim to, the stock.
(d) If the fair value of the stock is not agreed upon between the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, and the domestic professional corporation within 30 days of the delivery of the written offer, then either party may commence a civil action in the designated court, and if none, in the circuit court for the county in which the domestic professional corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the domestic professional corporation’s most recent registered office is located requesting that the fair value of the stock be found and determined. If the domestic professional corporation does not deliver a written offer in accordance with subsection (b), then the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, may commence a civil action in the designated court, and if none, in the circuit court for the county in which the domestic professional corporation’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the domestic professional corporation’s most recent registered office is located requesting that the fair value of the stock be found and determined. The personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, wherever residing, shall be made a party to the proceeding as an action against that person’s stock quasi in rem. Service shall be made in accordance with the rules of civil procedure. The personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, shall be entitled to a judgment against the domestic professional corporation for the amount of the fair value of that person’s stock as of the date of death, disqualification, or transfer. The court may, in its discretion, order that the judgment be paid in installments and with interest and on terms as the court may determine. The court may, if it so elects, appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers shall have the power and authority as shall be specified in the order of their appointment or an amendment thereof.
(e) The judgment shall include an allowance for interest at the rate the court finds to be fair and equitable in all the circumstances, from the date of death, disqualification, or transfer.
(f)(1) The court in a proceeding commenced under subsection (d) shall determine all court costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the court costs against the domestic professional corporation, except that the court may assess court costs against the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, in amounts which the court finds equitable, to the extent the court finds the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this section.
(2) The court in a proceeding commenced under subsection (d) may also assess the expenses of the respective parties in amounts the court finds equitable:
(A) against the domestic professional corporation and in favor of the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, if the court finds the domestic professional corporation did not substantially comply with the requirements of this section; or
(B) against either the domestic professional corporation or the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, in favor of the other party, if the court finds the party against whom expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this section.
(3) For purposes of this subsection (f), expenses means reasonable expenses of any kind that are incurred in connection with a proceeding brought under subsection (d).
(g) If a purchase, redemption, or transfer of the stock of a deceased stockholder, disqualified person, or transferee who is a disqualified person is not completed within 12 months after the death of the deceased stockholder or 12 months after the disqualification or transfer, as the case may be, the domestic professional corporation shall forthwith cancel the stock on its books and the personal representative of the estate of the deceased stockholder, the disqualified person, or the transferee, as the case may be, shall have no further interest as a stockholder in the domestic professional corporation other than that person’s right to payment for the stock under this section.
(h)(1) A professional corporation may acquire its own stock, and, the stock so acquired shall constitute authorized but unissued stock, provided however:
(A) the certificate of incorporation may provide that the acquired stock shall constitute authorized, issued, but not outstanding stock;
(B) the certificate of incorporation may prohibit the reissue of the acquired stock, in which case, the number of authorized shares of stock is reduced by the number of shares of stock acquired; or
(C) if the certificate of incorporation does not (i) provide that the acquired stock shall constitute authorized but unissued stock, (ii) prohibit the reissuance of the acquired stock, or (iii) provide that the acquired stock shall constitute authorized, issued, but not outstanding stock, then the board of directors may determine, at or prior to the time of the acquisition, that the acquired stock will constitute authorized, issued, but not outstanding stock.
(2) If the board of directors determines that any acquired stock was to be authorized, issued, but not outstanding in accordance with subsection (h)(1)(C), then the board of directors may thereafter determine that the acquired stock shall be converted to stock that is authorized but not issued.
(i) This section shall not require a domestic professional corporation to purchase the stock of a disqualified person if the disqualification is for less than 12 months from the date of disqualification. A domestic professional corporation may require the disqualified person to sell the disqualified person’s stock to the domestic professional corporation upon any disqualification.
(j) Any provision regarding purchase, redemption, or transfer of stock of a domestic professional corporation contained in the certificate of incorporation, bylaws, or any private agreement shall be specifically enforceable in the courts of this state.
(k) Nothing in this section shall prevent or relieve a domestic professional corporation from paying pension benefits or other deferred compensation for services rendered to or on behalf of a former stockholder as otherwise permitted by law.
(l) A domestic professional corporation may purchase its own stock from a disqualified person without regard to the availability of capital or surplus for the purchase; however, no purchase of or payment for the stock shall be made at a time when the domestic professional corporation is insolvent or when the purchase or payment would make it insolvent.
(m) The foregoing provisions of this section shall not apply to a domestic nonprofit professional corporation. Any member of a domestic nonprofit corporation who becomes a disqualified person must cease being a member not more than 12 months after the date of disqualification if he or she is then a disqualified person.
(Acts 1983, No. 83-514, p. 763, §10; Acts 1988, 1st Ex. Sess., No. 88-905, p. 474, §1; §10-4-389; amended and renumbered by Act 2009-513, p. 967, §205; Act 2020-73, §10; Act 2024-413, §1; Act 2025-281, §4.)
(a) Every individual who renders professional services as an employee of a professional corporation shall be liable for any negligent or wrongful act or omission in which that individual personally participates to the same extent as if that individual rendered the services as a sole practitioner.
(b) Except as otherwise provided in subsection (a), the personal liability of a stockholder, employee, director, or officer of a domestic professional corporation, other than a domestic nonprofit professional corporation, shall be no greater in any respect than that of a stockholder, employee, director, or officer of a corporation governed by the Alabama Business Corporation Law.
(c) Except as otherwise provided in subsection (a), the personal liability of a member, employee, director, or officer of a domestic nonprofit professional corporation shall be no greater in any respect than that of a member, employee, director, or officer of a corporation governed by the Alabama Nonprofit Corporation Law.
(d) Except as otherwise provided in subsection (a), the personal liability of a stockholder, member, employee, director, or officer of a foreign professional corporation shall be determined under the law of the jurisdiction in which it is organized.
(Acts 1983, No. 83-514, p. 763, §11; §10-4-390; amended and renumbered by Act 2009-513, p. 967, §205; Act 2024-413, §1.)
(a) The relationship between an individual performing professional services as an employee of a professional corporation, domestic or foreign, and a client or patient shall be the same as if the individual performed the services as a sole practitioner.
(b) The relationship between a professional corporation, domestic or foreign, performing professional services and the client or patient shall be the same as between the client or patient and the individual performing the services.
(c) Any privilege applicable to communications between a person rendering professional services and the person receiving the services recognized under the laws of Alabama, whether statutory or deriving from common law, shall remain inviolate and shall extend to a professional corporation, domestic or foreign, and its employees in all cases in which it would be applicable to communications between an individual rendering the professional services and a person receiving the services.
(Acts 1983, No. 83-514, p. 763, §12.; §10-4-391; amended and renumbered by Act 2009-513, p. 967, §205.)
A voting trust with respect to stock of a domestic professional corporation shall not be valid unless all the trustees and beneficiaries thereof are qualified persons, except that a voting trust may be validly continued for a period of 12 months after the death of a deceased beneficiary or after a beneficiary has become a disqualified person.
(Acts 1983, No. 83-514, p. 763, §13; §10-4-392; amended and renumbered by Act 2009-513, p. 967, §205; Act 2024-413, §1.)
At least one director of a domestic professional corporation and the president of a domestic professional corporation shall be qualified persons with respect to the domestic professional corporation; provided, however, that the foregoing restriction shall not apply for a period of 12 months after the death of the sole stockholder of a domestic professional corporation.
(Acts 1983, No. 83-514, p. 763, §14; §10-4-393; amended and renumbered by Act 2009-513, p. 967, §205; Act 2024-413, §1.)
Administrators, executors, guardians, conservators, or receivers of the estates of stockholders of a domestic professional corporation who hold all of the outstanding stock of the domestic professional corporation may amend the certificate of incorporation by signing a written consent to the certificate of amendment and delivering the certificate of amendment for filing to the Secretary of State. The certificate of amendment shall set forth, in addition to the information required to be included in the certificate of amendment by the Alabama Business Corporation Law, a statement that the administrators, executors, guardians, conservators, or receivers own all the outstanding stock.
(Acts 1983, No. 83-514, p. 763, §15; §10-4-394; amended and renumbered by Act 2009-513, p. 967, §207; Act 2019-94, §2; Act 2020-73, §10; Act 2024-413, §1.)
(a) A domestic professional corporation may convert to or merge with another corporation, professional corporation, or another type of entity, domestic or foreign, if permitted under the Alabama Business Corporation Law, the Alabama Nonprofit Corporation Law, or Article 8 of Chapter 1. Upon the merger or conversion, if the surviving or new corporation or converted entity, as the case may be, is to render professional services in this state, it shall comply with this chapter.
(b) An unincorporated professional association organized under Article 1 of Chapter 30 may merge with a domestic professional corporation. In the merger, the unincorporated professional association shall follow the procedure specified in the Alabama Business Corporation Law, provided that:
(1) The surviving corporation shall be a domestic professional corporation,
(2) The following terms, when used in the Alabama Business Corporation Law to refer to an unincorporated professional association, shall have the following meanings:
a. BOARD OF DIRECTORS means board of governors.
b. CORPORATION means unincorporated association.
c. STOCK or SECURITIES in the case of an unincorporated professional association which is a nonstock organization, means the undivided interests of the members in the assets of the association.
d. STOCKHOLDER in the case of an unincorporated association which is a nonstock organization, means member.
(3) The plan of merger or plan of conversion shall be approved by a vote of two-thirds of the members of the professional association.
(Acts 1983, No. 83-514, p. 763, §16; §10-4-395; amended and renumbered by Act 2009-513, p. 967, §207; Act 2019-94, §2; Act 2024-413, §1.)
The Attorney General may institute proceedings to involuntarily dissolve a domestic professional corporation. A licensing authority may request that the Attorney General institute the proceedings.
(Acts 1983, No. 83-514, p. 763, §17; §10-4-396; amended and renumbered by Act 2009-513, p. 967, §209; Act 2019-94, §2; Act 2024-413, §1.)
(a) A foreign professional corporation shall be entitled to register under Article 7 of Chapter 1 for authority to render professional services in this state only if:
(1) A domestic professional corporation would be allowed to register or procure a certificate of authority or equivalent authorization to render professional services in the state under whose laws the foreign professional corporation is organized;
(2) The foreign professional corporation meets the requirements of Section 10A-4-2.01;
(3) The foreign professional corporation designates the Alabama licensed individual or individuals through whom it will render professional services in this state and the individual or individuals are not, at the time of the designation, so designated by any other foreign professional corporation;
(4) The name of the foreign professional corporation meets the requirements of Section 10A-1-5.08, provided that the foreign professional corporation can meet the requirements of Section 10A-1-5.08 by adding at the end of its name, for use in this state, the words “professional corporation” or the abbreviation “P.C.”; and
(5) All the stockholders, or all the members, in the case of a nonprofit professional corporation which has members, at least one director, and the president of the foreign professional corporation are licensed in at least one state or territory of the United States or the District of Columbia to render the professional services which the foreign professional corporation would render in this state.
(6) The foreign professional corporation includes in its application a statement acknowledging that it will be subject to the jurisdiction of the Alabama regulatory and licensing authorities with respect to any professional services rendered to clients or patients in this state.
(b) No foreign professional corporation shall maintain an office in this state for the conduct of business or professional practice until it has obtained a certificate of authority to render professional services in this state.
(Acts 1983, No. 83-514, p. 763, §18; §10-4-397; amended and renumbered by Act 2009-513, p. 967, §209; Act 2024-413, §1.)
The certificate of authority of a foreign professional corporation may be revoked by the Secretary of State if the foreign professional corporation fails to comply with any provision of this chapter applicable to the foreign professional corporation. Each licensing authority in this state shall certify to the Secretary of State, from time to time, the names of all foreign professional corporations which have given cause for revocation as provided in this chapter, together with the facts pertinent thereto. Whenever a licensing authority shall certify the name of a foreign professional corporation to the Secretary of State as having given cause for revocation, the licensing authority shall concurrently mail to the foreign professional corporation at its registered office in this state notice that the certification has been made. No certificate of authority of a foreign professional corporation shall be revoked by the Secretary of State unless the Secretary of State shall have given the foreign professional corporation not less than 60 days’ notice thereof and the foreign professional corporation shall fail prior to revocation to correct the noncompliance.
(Acts 1983, No. 83-514, p. 763, §19; §10-4-398; amended and renumbered by Act 2009-513, p. 967, §209; Act 2024-413, §1.)
(a) Every business professional corporation, domestic or foreign, is required to file an annual report under the Alabama Business Corporation Law, and shall include in the annual report, in addition to the items required by the Alabama Business Corporation Law:
(1) A statement that all the stockholders, at least one director, and the president of the corporation are qualified persons with respect to the corporation, and
(2) In the case of a foreign professional corporation, the name or names of the Alabama licensed professional or professionals through whom the foreign professional corporation will render professional services in this state.
(b) Financial information contained in the annual report of a professional corporation, other than the amount of stated capital of the corporation, shall not be open to public inspection nor shall the licensing authority disclose any facts or information obtained therefrom except insofar as its official duty may require the same to be made public or in the event the information is required for evidence in any criminal proceedings or in any other action by the State of Alabama.
(Acts 1983, No. 83-514, p. 763, §20; §10-4-399; amended and renumbered by Act 2009-513, p. 967, §209; Act 2019-94, §2; Act 2024-413, §1.)
(a) Each licensing authority of this state may propound to any professional corporation, domestic or foreign, organized to practice a profession within the jurisdiction of the licensing authority, and to any officer or director thereof, the interrogatories as may be reasonably necessary and proper to enable the licensing authority to ascertain whether the professional corporation has complied with all the provisions of this chapter applicable to the professional corporation. The interrogatories shall be answered within 30 days after the mailing thereof, or within the additional time as shall be fixed by the licensing authority, and the answers thereto shall be full and complete and shall be made in writing and under oath. If the interrogatories be directed to an individual they shall be answered by him or her, and if directed to a professional corporation they shall be answered by the president, vice president, secretary, or assistant secretary thereof. The licensing authority shall certify to the Attorney General, for such action as the Attorney General may deem appropriate, all interrogatories and answers thereto which disclosed a violation of any of the provisions of this chapter.
(b) Interrogatories propounded by a licensing authority and the answers thereto shall not be open to public inspection nor shall the licensing authority disclose any facts or information obtained therefrom except insofar as its official duty may require the same to be made public or in the event the interrogatories or the answers thereto are required for evidence in any criminal proceedings or in any other action by this state.
(Acts 1983, No. 83-514, p. 763, §21; §10-4-400; amended and renumbered by Act 2009-513, p. 967, §209; Act 2024-413, §1.)
(a) Each officer and director of a professional corporation, domestic or foreign, who signs any certificate, statement, report, application, answer to an interrogatory, or other document filed pursuant to this article with the licensing authority having jurisdiction which is known to the officer or director to be false in any material respect, shall be deemed to be guilty of a Class C misdemeanor.
(b) If any professional corporation, domestic or foreign, or individual shall fail to answer interrogatories directed to the professional corporation or to the individual under Section 10A-4-5.05, the licensing authority which propounded the interrogatories may seek an order from a circuit court with competent jurisdiction to compel an answer.
(Acts 1983, No. 83-514, p. 763, §22; §10-4-401; amended and renumbered by Act 2009-513, p. 967, §209; Act 2024-413, §1.)
(a) Nothing in this chapter shall restrict or limit in any manner the authority or duty of a licensing authority with respect to individuals rendering a professional service within the jurisdiction of the licensing authority. Nothing in this chapter shall restrict or limit any law, rule, or regulation pertaining to standards of professional conduct.
(b) Nothing in this chapter shall limit the authority of a licensing authority to impose requirements in addition to those stated in this article on any professional corporation, domestic or foreign, within the jurisdiction of the licensing authority.
(Acts 1983, No. 83-514, p. 763, §23; §10-4-402; amended and renumbered by Act 2009-513, p. 967, §209.)
(a) The provisions of this chapter shall apply to all existing corporations organized under the statute formerly codified as Article 11 of Chapter 4, Title 10 and repealed by Acts 1983, No. 83-514, effective January 1, 1984; provided, that any professional corporation, or nonprofit corporation, in existence on December 31, 1983, in which duly licensed medical and dental professionals are stockholders, or in the case of a nonprofit professional corporation, render medical and dental services, shall be deemed to be in compliance with Sections 10A-4-2.01 and 10A-4-2.03, as amended, and other applicable provisions of this chapter. The repeal of a prior act by this chapter shall not impair, or otherwise affect, the organization or continued existence of an existing domestic professional corporation nor the right of any foreign professional corporation presently qualified to render professional services in this state to continue to do so without again qualifying to render professional services in this state.
(b) Any unincorporated professional association organized under Article 1 of Chapter 30 may become subject to the provisions of this chapter by amending its certificate of association as a certificate of incorporation in compliance with this chapter, and delivering its certificate of incorporation to the Secretary of State for filing.
(c) Any domestic nonprofit corporation rendering professional services may become subject to the provisions of this chapter by amending its certificate of incorporation in compliance with this chapter and delivering the amendment to its certificate of incorporation to the Secretary of State for filing.
(d) The provisions of this chapter shall not apply to any unincorporated professional association now in existence under Section 10A-30-1.01, or to any domestic nonprofit corporation rendering professional services unless the association or nonprofit corporation voluntarily becomes subject to this chapter as herein provided, and nothing contained in this chapter shall alter or affect any existing or future right or privilege permitting or not prohibiting performance of professional services through the use of any other form of business organization.
(Acts 1983, No. 83-514, p. 763, §24; Acts 1984, No. 84-259, p. 431, §1; Acts 1988, 1st Ex. Sess., No. 88-905, p. 474, §1; §10-4-403; amended and renumbered by Act 2009-513, p. 967, §209; Act 2020-73, §10; Act 2024-413, §1.)
This chapter and the provisions of Chapter 1, to the extent applicable to limited liability companies, shall be known and may be cited as the “Alabama Limited Liability Company Law.”
(Acts 1993, No. 93-724, p. 1425, §1; §10-12-1; amended and renumbered by Act 2009-513, p. 967, §211.)
As used in this chapter, unless the context otherwise requires, the following terms mean:
(1) ARTICLES OF ORGANIZATION. The filing instrument provided for by Section 10A-5-2.01, or, if it has been amended or restated, as most recently amended or restated. In the case of a foreign limited liability company, the term includes all documents serving a similar function that are required to be filed to form the limited liability company in the state or other jurisdiction where it is organized. The term articles of organization as used in this chapter is synonymous with the term certificate of formation as defined in Section 10A-1-1.03(6). In this chapter, the use of the term certificate of formation shall be deemed to include articles of organization, and vice-versa. Together with the operating agreement, the articles of organization or certificate of formation of a limited liability company constitute its governing documents within the meaning of Section 10A-1-1.03(40).
(2) BUSINESS ENTITY. A corporation, limited liability company, partnership, limited partnership, registered limited liability partnership, or other entity organized to engage in business, whether for profit or not, created under the laws of the State of Alabama, predecessor law, or law of another jurisdiction.
(3) FINANCIAL RIGHTS. Rights to a. share in profits and losses as provided in Section 10A-5-5.03, b. receive interim distributions as provided in Section 10A-5-5.04, and c. receive termination distributions as provided in Section 10A-5-7.05.
(4) FOREIGN LIMITED LIABILITY COMPANY. An organization formed under the laws of any jurisdiction other than Alabama that is substantially similar to a limited liability company.
(5) GOVERNANCE RIGHTS. All a member’s rights as a member of a limited liability company except financial rights, including without limitation, the rights to participate in the management of the limited liability company and to bind the limited liability company as provided in Section 10A-5-3.03.
(6) LIMITED LIABILITY COMPANY or DOMESTIC LIMITED LIABILITY COMPANY. An organization that is formed and existing under this chapter.
(7) MEMBER. A person reflected in the required records of a limited liability company as the owner of some governance rights of a membership interest in the limited liability company.
(8) OPERATING AGREEMENT. A written agreement of the member or members governing the affairs of a limited liability company and the conduct of its business. The operating agreement, if entered into together with the articles of organization or certificate of formation of a limited liability company constitute its governing documents within the meaning of Section of 10A-1-1.03(40).
(Acts 1993, No. 93-724, p. 1425, §2; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-2; amended and renumbered by Act 2009-513, p. 967, §211.)
Unless its certificate of formation provides otherwise, every limited liability company has perpetual duration and succession in its name and has , without limitation, all powers enumerated in Chapter 1, including Sections 10A-1-2.11, 10A-1-2.12, and 10A-1-2.13.
(Acts 1993, No. 93-724, p. 1425, §4; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-4; amended and renumbered by Act 2009-513, p. 967, §213.)
Unless its certificate of formation provides otherwise, every limited liability company has the power to indemnify a member, manager, or employee or former member, manager, or employee of the limited liability company against expenses actually and reasonably incurred in connection with the defense of an action, suit, or proceeding, civil or criminal, in which the member, manager, or employee is made a party by reason of being or having been a member, manager, or employee of the limited liability company, except in relation to matters as to which the member, manager, or employee is determined in the action, suit, or proceeding to be liable for negligence or misconduct in the performance of duty; to make any other indemnification that is authorized by the governing documents of the limited liability company or by a resolution adopted by the members after notice, unless notice is waived; and to purchase and maintain insurance on behalf of any person who is or was a member, manager, or employee of the limited liability company against any liability asserted against and incurred by the member, manager, or employee in any capacity or arising out of the member’s, manager’s, or employee’s status as such, whether or not the limited liability company would have the power to indemnify the member, manager, or employee against that liability under the provisions of this section.
(Act 2009-513, p. 967, §214.)
All persons who assume to act as a limited liability company without authority to do so shall be jointly and severally liable for all debts and liabilities created by their so acting.
(Acts 1993, No. 93-724, p. 1425, §7; §10-12-7; amended and renumbered by Act 2009-513, p. 967, §216.)
(a) The terms “partnership” and “limited partnership,” when used in any chapter or title other than the Alabama Limited Liability Company Law, the Alabama General Partnership Law, and the Alabama Limited Partnership Law, and any successors of those laws, include a limited liability company organized under this chapter, unless the context requires otherwise.
(b) Notwithstanding subsection (a), for purposes of taxation, other than Chapter 14A of Title 40, a domestic or foreign limited liability company shall be treated as a partnership unless it is classified otherwise for federal income tax purposes, in which case it shall be classified in the same manner as it is for federal income tax purposes.
(c) A foreign or domestic limited liability company governed by this chapter is subject to any amendment to or repeal of this chapter.
(Acts 1993, No. 93-724, p. 1425, §8; Act 97-920, 1st Ex. Sess., p. 312, §1; Act 2000-705, p. 1442, §4; §10-12-8; amended and renumbered by Act 2009-513, p. 967, §216.)
One or more persons may form a limited liability company by filing a certificate of formation for the limited liability company with the judge of probate of the county in which the initial registered office of the limited liability company is located pursuant to Article 3 of Chapter 1.
(Acts 1993, No. 93-724, p. 1425, §9; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-9; amended and renumbered by Act 2009-513, p. 967, §218.)
In addition to the information required for a certificate of formation by Section 10A-1-3.05, the certificate of formation of a limited liability company shall set forth:
(1) The right, if given, of the member or members to admit additional members, and the terms and conditions of the admission.
(2) The circumstances, if any, under which the cessation of membership of one or more members will result in dissolution of the limited liability company.
(3) If the limited liability company is to be managed by one or more managers, the certificate of formation shall so state and shall set out the names and the mailing addresses of the manager or managers who are to serve as managers until their successors are elected and begin serving.
(Acts 1993, No. 93-724, p. 1425, §10; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-10; amended and renumbered by Act 2009-513, p. 967, §218.)
(a) The certificate of formation may be amended by delivering the amendment to the judge of probate in whose office the certificate of formation is filed. The amendment shall set forth:
(1) The name of the limited liability company.
(2) The date of filing of the certificate of formation.
(3) The amendment(s).
(b) Within 30 days after the happening of any of the following events, an amendment to the certificate of formation shall be filed to reflect the occurrence of such event or events:
(1) There is a change in the name of the limited liability company.
(2) There is a false or erroneous statement in the certificate of formation.
(3) There is a change in the period of duration of the limited liability company stated in the certificate of formation.
(4) The members desire to make a change in any other statement in the certificate of formation to accurately represent the agreement between them.
(c) The form for evidencing an amendment to the certificate of formation of a limited liability company shall contain terms and provisions consistent with this chapter. The amendment shall be approved, unless the certificate of formation requires a greater vote, by a majority vote of the members entitled to vote.
(Acts 1993, No. 93-724, p. 1425, §11; §10-12-11; amended and renumbered by Act 2009-513, p. 967, §218.)
(a) Unless otherwise specified in this chapter, each filing instrument required by this chapter to be filed in the office of the judge of probate shall be executed in the following manner:
(1) The certificate of formation shall be signed by one or more members named therein or an organizer.
(2) An amendment shall be signed by at least one member.
(3) If an amendment requires the adding of a new member, the amendment shall be signed by a person who was a member before the amendment was filed and by the new member.
(4) Articles of dissolution shall be signed by at least one member, as authorized pursuant to the operating agreement.
(b) Any person may sign a document required by this chapter by an attorney-in-fact, but a power of attorney relating to the admission of a member shall specify that admission of a new member is an authorized act of the attorney-in-fact.
(Acts 1993, No. 93-724, p. 1425, §13; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-13; amended and renumbered by Act 2009-513, p. 967, §220.)
A limited liability company may not transact business or incur indebtedness, except that which is incidental to its organization or to obtaining subscriptions for or payment of contributions, until the certificate of formation has been filed. Persons engaged in prefiling activities other than those authorized by this section shall be jointly and severally liable for any debts or liabilities incurred in the course of those activities as provided in Section 10A-5-1.05. In no event shall the activities of an organizer authorized under this chapter result in liability for such person under this section. This section shall not be interpreted to invalidate any debts, contracts, or liabilities of the limited liability company incurred on behalf of the limited liability company prior to the filing of its certificate of formation.
(Act 2009-513, p. 967, §222.)
(a) Each limited liability company shall keep at its registered office or principal place of business in this state the following records:
(1) A current list of the full name and last known business or residence street address of each member, and each manager, if any.
(2) A copy of the filed certificate of formation and all amendments thereto, together with executed copies of any powers of attorney pursuant to which any documents have been executed.
(3) Copies of the limited liability company’s federal, state, and local income tax returns and reports, if any, for the three most recent years.
(4) Copies of any then effective operating agreements including any amendments thereto.
(5) Copies of any financial statements of the limited liability company for the three most recent years.
(b) Those records, and any other books and records of the limited liability company, wherever situated, are subject to inspection and copying for any proper purpose at the reasonable request, and at the expense of, any member or manager or the member’s or manager’s agent or attorney during regular business hours as provided in Sections 10A-1-3.32 and 10A-1-3.33. Any agent, member, or manager of a limited liability company who, without reasonable cause, refuses to allow any member or the member’s agent or attorney to inspect or copy any books or records of the limited liability company for any proper purpose shall be personally liable to the member for a penalty in an amount not to exceed 10 percent of the fair market value of the membership interest of the member, in addition to any other damages or remedy.
(Acts 1993, No. 93-724, p. 1425, §16; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-16; amended and renumbered by Act 2009-513, p. 967, §224.)
Neither a member nor a manager of a limited liability company is a proper party to proceedings by or against a limited liability company, except where the object is to enforce a member’s or manager’s rights against or liability to the limited liability company.
(Acts 1993, No. 93-724, p. 1425, §18; §10-12-18; amended and renumbered by Act 2009-513, p. 967, §226.)
Except as otherwise provided in the operating agreement, a member may lend money to and transact any lawful business with the limited liability company and, subject to other applicable law, have the same rights and obligations with respect thereto as a person who is not a member.
(Acts 1993, No. 93-724, p. 1425, §19; §10-12-19; amended and renumbered by Act 2009-513, p. 967, §228.)
(a) Except as otherwise provided in this chapter, a member of a limited liability company is not liable under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation, or liability of the limited liability company, whether arising in contract, tort, or otherwise, or for the acts or omissions of any other member, manager, agent, or employee of the limited liability company.
(b) A member may be liable to creditors of the limited liability company for a written agreement to make a contribution to the limited liability company.
(c) A member of a limited liability company may become liable by reason of the member’s own acts or conduct.
(Acts 1993, No. 93-724, p. 1425, §20; §10-12-20; amended and renumbered by Act 2009-513, p. 967, §228.)
(a) Except as provided in subsection (b), every member is an agent of the limited liability company for the purpose of its business or affairs, and the act of any member, including, but not limited to, the execution in the name of the limited liability company of any instrument, for apparently carrying on in the usual way the business or affairs of the limited liability company binds the limited liability company, unless the member so acting has, in fact, no authority to act for the limited liability company in the particular matter and the person with whom the member is dealing has knowledge of the fact that the member has no such authority.
(b) If the certificate of formation provides that management of the limited liability company is vested in a manager or managers, both of the following conditions apply:
(1) No member, acting solely in the capacity as member, is an agent for the limited liability company.
(2) Every manager is an agent of the limited liability company for the purpose of its business or affairs, and the act of any manager, including, but not limited to, the execution in the name of the limited liability company of any instrument, for apparently carrying on in the usual way the business or affairs of the limited liability company binds the limited liability company, unless the manager so acting has, in fact, no authority to act for the limited liability company in the particular matter and the person with whom the manager is dealing has knowledge of the fact that the manager has no such authority.
(c) An act of a manager or a member which is not apparently for the carrying on in the usual way the business of the limited liability company does not bind the limited liability company unless authorized in accordance with the operating agreement at the time of the transaction or at any other time.
(d) No act of a manager or member in contravention of a restriction on authority shall bind the limited liability company to persons having knowledge of the restriction.
(e) In a limited liability company managed by its members under subsection (a) of Section 10A-5-4.01, the only fiduciary duties a member owes to the company or to its other members are the duty of loyalty and the duty of care imposed by subsections (f) through (g).
(f) A member’s duty of loyalty to a member-managed limited liability company and its members is limited to each of the following:
(1) To account to the limited liability company and to hold as trustee for it any property, profit, or benefit derived by the member in the conduct or winding up of the limited liability company’s business or derived from a use by the member of the limited liability company’s property, including the appropriation of the limited liability company’s opportunity.
(2) To refrain from dealing with the limited liability company in the conduct or winding up of the limited liability company’s business as or on behalf of a party having an interest adverse to the limited liability company.
(3) To refrain from competing with the limited liability company in the conduct of the limited liability company’s business before the dissolution of the limited liability company.
(g) A member’s duty of care to a member-managed limited liability company and its other members in the conduct or winding up of the limited liability company’s business is limited to refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
(h) A member shall discharge the duties to a member-managed company and its other members under this chapter and under the operating agreement and exercise any rights consistently with the obligation of good faith and fair dealing.
(i) A member of a member-managed company does not violate a duty or obligation under this chapter or under the operating agreement merely because the member’s conduct furthers the member’s own interest.
(j) This section applies to a person winding up the limited liability company’s business as the personal or legal representative of the last surviving member as if the person were a member.
(k) If the management of a limited liability company is vested in a manager or managers pursuant to subsection (b) of Section 10A-5-4.01, each of the following applies:
(1) The only duty a member who is not also a manager owes to the company or to the other members solely by reason of being a member is to not disclose or otherwise use information described in Sections 10A-1-3.31 and 10A-5-2.06(a), whether or not obtained under the authority of Sections 10A-1-3.32 and 10A-5-2.06(b), to the detriment of the company or the other members.
(2) A manager is held to the same standards of conduct prescribed for members in subsections (f) through (i).
(3) A member who pursuant to the operating agreement exercises some or all of the rights of a manager in the management and conduct of the company’s business is held to the standards of conduct in subsections (f) through (i) to the extent that the member exercises the managerial authority vested in a manager by this chapter.
(4) A manager is relieved of liability imposed by law for violation of the standards prescribed by subsections (f) through (i) to the extent of the managerial authority delegated to the members by the operating agreement.
(l) The governing documents may modify the duties contained in subsections (e) through (k), but may not provide for any of the following:
(1) Unreasonably restrict a right to information or access to records under Sections 10A-1-3.31, 10A-1-3.32, 10A-1-3.33, and 10A-5-2.06.
(2) Eliminate the duty of loyalty under subsection (f) of this section or under subsection (e) of Section 10A-5-6.06, but the governing documents of the limited liability company may provide for any of the following:
a. Identify types or categories of activities that do not violate the duty of loyalty.
b. Specify the number or percentage of members or percentage of membership interests or number or percentage of disinterested managers that may authorize or ratify, after full disclosure of all material facts, a specific act or transaction that otherwise would violate the duty of loyalty.
(3) Unreasonably reduce the duty of care under subsection (g) of this section or subsection (e) of Section 10A-5-6.06.
(4) Eliminate the obligation of good faith and fair dealing under subsection (h), but the operating agreement may determine the standards by which the performance of the obligation is to be measured, if the standards are not manifestly unreasonable.
(Acts 1993, No. 93-724, p. 1425, §21; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-21; amended and renumbered by Act 2009-513, p. 967, §228.)
(a) Unless otherwise stated in the certificate of formation, the management of the limited liability company is vested in its members. Subject to any provisions in the operating agreement or this chapter restricting or enlarging the management rights and duties of any person or group or class of persons, the members shall have the right and authority to manage the business or affairs of the limited liability company and to make all decisions with respect thereto.
(b) If the certificate of formation vests management of the limited liability company in one or more managers, then the managers shall have the power to manage the business or affairs of the limited liability company as provided in the operating agreement. Except as otherwise provided in the operating agreement, the managers:
(1) Shall be designated, appointed, elected, removed, or replaced by a vote, approval, or consent of more than one-half the number of members.
(2) Need not be members of the limited liability company or natural persons.
(3) Unless they have been earlier removed or have earlier resigned, shall hold office until their successors have been elected and qualified.
(c) The certificate of formation of a limited liability company may provide for classes or groups of members or managers having such relative rights, powers, and duties as so provided, and may make provision for the future creation of additional classes or groups of members or managers having such relative rights, powers, and duties as may be created in the manner provided in the certificate of formation, including rights, duties, and powers senior to existing classes and groups of members or managers. The certificate of formation may provide for taking action, including the amendment of the certificate of formation or operating agreement, without the vote or approval of one or more members or classes or groups of members or managers, including an action to create one or more classes of interests in the company that were not previously outstanding, but are authorized under the certificate of formation.
(d) The certificate of formation may grant to all or certain identified members or managers or a specified class or group of members or managers the right to vote separately or with all or any class or group of members or managers on any matter. Voting by members or managers may be on a per capita, number, financial interest, class, group, or any other basis.
(e) The governing documents may, with respect to any rights to vote, set forth provisions relating to notice of the time, place, or purpose of any meeting at which any matter is to be voted on by any members or managers or class or group of members or managers, waiver of the notice, action by consent without a meeting, establishment of a record date, quorum requirements, voting in person or by proxy, or any other matter with respect to the exercise of any such right to vote.
(Acts 1993, No. 93-724, p. 1425, §22; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-22; amended and renumbered by Act 2009-513, p. 967, §230.)
(a) Property may be acquired, held, and conveyed in the name of the limited liability company. Any estate in real property may be acquired in the name of the limited liability company and title to any estate so acquired shall vest in the limited liability company itself rather than in the members individually.
(b) All property originally contributed to the limited liability company or subsequently acquired by a limited liability company by purchase or otherwise is limited liability company property. A member has no interest in specific limited liability company property.
(c) Except as provided in subsection (d), title to property of the limited liability company that is held in the name of the limited liability company may be transferred by an instrument of transfer executed by any member in the name of the limited liability company.
(d) If the certificate of formation provides that management of the limited liability company is vested in a manager or managers, title to property of the limited liability company that is held in the name of the limited liability company may be transferred by an instrument of transfer executed by any manager in the name of the limited liability company; but a member, acting solely as a member, shall not have that authority.
(e) Title to property of the limited liability company that is held in the name of one or more members or managers with an indication in the instrument transferring title to the property to them of their capacity as members or managers of a limited liability company or of the existence of a limited liability company, even if the name of the limited liability company is not indicated, may be transferred by an instrument of transfer executed by the persons in whose name title is held.
(f) Property transferred under subsections (c), (d), and (e) may be recovered by the limited liability company if it proves that the act of the person executing the instrument of transfer did not bind the limited liability company under Section 10A-5-3.03, unless the property has been transferred by the initial transferee or a person claiming through the initial transferee to a subsequent transferee who gives value without having notice that the person who executed the instrument of initial transfer lacked authority to bind the limited liability company.
(g) Title to property of the limited liability company that is held in the name of one or more persons other than the limited liability company, without an indication in the instrument transferring title to the property to them in their capacity as members or managers of a limited liability company or of the existence of a limited liability company, may be transferred free of any claims of the limited liability company or the members by the persons in whose name title is held to a transferee who gives value without having notice that it is property of a limited liability company.
(Acts 1993, No. 93-724, p. 1425, §23; §10-12-23; amended and renumbered by Act 2009-513, p. 967, §230.)
(a) The member or members of a limited liability company may enter into an operating agreement to regulate or establish the affairs of the limited liability company, the conduct of its business, and the relations of its members. An operating agreement may contain any provisions regarding the affairs of a limited liability company and the conduct of its business that are not inconsistent with the laws of this state or the articles of organization.
(b) In the event there is more than one member, any operating agreement shall initially be agreed to, in writing, by all of the members. If an operating agreement does not provide for the method by which an operating agreement may be amended, then all of the members shall agree in writing to any amendment.
(c) A court of equity may enforce an operating agreement by injunction or by other relief that the court in its discretion determines to be fair and appropriate in the circumstances. As an alternative to injunctive or other equitable relief, when the provisions of Section 10A-5-7.02 are applicable, the court may order dissolution of the limited liability company.
(Acts 1993, No. 93-724, p. 1425, §24; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-24; amended and renumbered by Act 2009-513, p. 967, §230.)
(a) A member may bring an action in the right of a limited liability company to recover a judgment in its favor if the members or managers with authority to do so have refused to bring the action or if an effort to cause those members or managers to bring the action is not likely to succeed.
(b) In a derivative action, the plaintiff shall be a member (1) at the time of bringing the action or have succeeded to the right of a member by operation of law or pursuant to the terms of the operating agreement from a person who was a member and (2) at the time of the transaction of which he or she complains.
(c) In a derivative action, the complaint shall set forth with particularity the effort of the plaintiff to secure initiation of the action by the members or managers with authority to do so, or the reasons for not making the effort.
(d) If a derivative action is successful, in whole or in part, or if anything is received by the plaintiff as a result of a judgment, compromise, or settlement of an action or claim, the court may award the plaintiff reasonable expenses, including reasonable attorney’s fees, and shall direct the plaintiff to remit to the limited liability company the remainder of those proceeds.
(Acts 1993, No. 93-724, p. 1425, §25; §10-12-25; amended and renumbered by Act 2009-513, p. 967, §230.)
The contributions of a member to the limited liability company may be in cash, property, services previously rendered, or a promissory note or other binding obligation to pay cash, convey property, or to render services.
(Acts 1993, No. 93-724, p. 1425, §26; §10-12-26; amended and renumbered by Act 2009-513, p. 967, §232.)
(a) Except as provided in the certificate of formation, a member is obligated to the limited liability company to perform any promise to pay cash or convey property or to render services, even if the member is unable to perform because of death, disability, or any other reason. A member who does not perform such a promise is obligated at the option of the limited liability company to pay cash equal to the amount or value of the portion of the contribution that has not been paid, conveyed, or rendered.
(b) The operating agreement may provide that the interest of any member who fails to make any contribution that the member is obligated to make, or who fails to pay any agreed assessment that the member is obligated to make, shall be subject to a reasonable penalty for such failure. The penalty may take the form of reducing the defaulting member’s proportionate interest in the limited liability company, subordinating the member’s interest to that of nondefaulting members, a forced sale of the member’s interest in compliance with reasonable procedures for notice and disposition, forfeiture of the member’s interest on compliance with reasonable procedures for notice, the lending of the amount necessary to meet the member’s commitment by other members, affixing of the value of the member’s interest by appraisal or by suitable formula and redemption or sale of the member’s interest at that value, or other reasonable penalty.
(c) Unless otherwise provided in the operating agreement, the obligation of a member to perform any promise with respect to a contribution to the capital of the limited liability company, or to return money or other property paid or distributed in violation of this chapter, may be compromised only by consent of all the members. Notwithstanding the compromise, a creditor of a limited liability company who extends credit, or whose claim arises, after filing of the certificate of formation or an amendment thereto which, in either case, reflects the obligation, and before the amendment thereof to reflect the compromise, may enforce the original obligation.
(Acts 1993, No. 93-724, p. 1425, §27; §10-12-27; amended and renumbered by Act 2009-513, p. 967, §232.)
The profits and losses, income, deductions, and credits, and items of income, deduction, and credits of the limited liability company shall be allocated among the members in the manner provided in the operating agreement. If the operating agreement does not so provide, profits and losses, income, deductions, and credits, and items of income, deductions, and credits shall be allocated on the basis of the pro rata value of the contributions made by each member to the extent they have been made and not returned.
(Acts 1993, No. 93-724, p. 1425, §28; §10-12-28; amended and renumbered by Act 2009-513, p. 967, §232.)
(a) Except as provided in this section or in the operating agreement, members are entitled to receive distributions from the limited liability company in proportion to their respective rights to share in profits under Section 10A-5-5.03.
(b) Subsection (a) shall not apply to any of the following:
(1) Distributions on dissolution.
(2) Distributions governed by a contrary provision in the operating agreement.
(c) No distribution may be made unless, after the distribution is made, the assets of the limited liability company are sufficient to pay all liabilities of the limited liability company except liabilities to members on account of their contributions.
(d) Unless otherwise provided in the operating agreement, a member has no right to receive and may not be required to accept a distribution in kind.
(Acts 1993, No. 93-724, p. 1425, §29; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-29; amended and renumbered by Act 2009-513, p. 967, §232.)
Unless the governing documents of a limited liability company or a private agreement provide for the purchase of the interest of a former member whose membership has ceased, neither the limited liability company nor its members shall be obligated to purchase the interest of a former member whose membership has ceased.
(Acts 1993, No. 93-724, p. 1425, §30; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-30; amended and renumbered by Act 2009-513, p. 967, §232.)
(a) After the filing of a limited liability company’s original certificate of formation, additional members may be admitted as follows:
(1) In the case of a member acquiring an interest directly from the limited liability company, upon compliance with the operating agreement or, if the operating agreement does not provide for the admission of additional members, with the written consent of all members.
(2) In the case of an assignee of an interest of a member, by complying with Section 10A-5-6.03.
(b) The effective time of admission of a member to a limited liability company shall be the later of:
(1) The date the limited liability company is formed.
(2) The time provided in the operating agreement, or if no time is provided, then when the person’s admission is reflected in the records of the limited liability company.
(Acts 1993, No. 93-724, p. 1425, §31; §10-12-31; amended and renumbered by Act 2009-513, p. 967, §234.)
(a) Except as otherwise provided in the operating agreement:
(1) A membership interest in a limited liability company is assignable in whole or in part.
(2) An assignment of a member’s interest in a limited liability company does not of itself dissolve the limited liability company or entitle the assignee to exercise any management rights.
(3) An assignment only entitles the assignee to the financial rights of the assignor to the extent assigned.
(4) A member who assigns the member’s interest in a limited liability company does not cease to be a member until the assignee is substituted as provided in Section 10A-5-6.03.
(b) A limited liability company, in the governing documents, may provide that a member’s interest in the limited liability company may be evidenced by a certificate of limited liability company interest issued by the limited liability company. Any provision for the assignment or transfer of a limited liability company interest represented by such a certificate shall be consistent with this chapter.
(c) Any purported transfer of a member’s interest in violation of this section is void.
(Acts 1993, No. 93-724, p. 1425, §32; §10-12-32; amended and renumbered by Act 2009-513, p. 967, §234.)
(a) Except as otherwise provided in the operating agreement:
(1) An assignee of an interest in a limited liability company may become a member only if the other members unanimously consent. The consent of a member may be evidenced in any manner specified in the operating agreement, but in the absence of such a specification, consent shall be evidenced by a written instrument, dated and signed by the member.
(2) The assignor of a membership interest is not released from liability to the limited liability company under Section 10A-5-5.02, whether or not the assignee becomes a member.
(3) A member who assigns the member’s entire interest in the limited liability company ceases to be a member or to have the power to exercise any rights of a member when any assignee of the interest becomes a member with respect to the assigned interest.
(b) An assignee who has become a member has, to the extent assigned, the rights and powers, and is subject to the restrictions and liabilities, of a member under the governing documents and this chapter. An assignee who becomes a member also is liable for the obligations of the assignor to make contributions as provided in Section 10A-5-5.02. The assignee is not obligated for liabilities that are unknown to the assignee at the time of becoming a member.
(Acts 1993, No. 93-724, p. 1425, §33; §10-12-33; amended and renumbered by Act 2009-513, p. 967, §234.)
(a) Except as otherwise provided in the governing documents:
(1) If a member who is an individual dies or if a court of competent jurisdiction adjudges a member to be incompetent to manage the member’s person or property, the member’s personal representative, conservator, legal representative, heirs, or legatees may exercise all the member’s financial rights for the purpose of settling the member’s estate or administering the member’s property, including any power the member had to transfer the membership interest.
(2) If a member is a corporation, limited liability company, trust, general partnership, limited partnership, registered limited liability partnership, custodianship, or other entity and is dissolved or terminated, the financial rights of that member may be exercised by the legal representative or successor of that member.
(b) The personal representative, conservator, legal representative, heirs, or legatees of a deceased or incompetent member shall have the same rights and duties with respect to the inspection and copying of the books and records of the limited liability company that a member would have under Sections 10A-1-3.31, 10A-1-3.32, and 10A-5-2.06 and subdivision (1) of subsection (k) of Section 10A-5-3.03. The duties of care and loyalty specified in Section 10A-5-3.03, including any modifications specified therein, shall inure to the benefit of the personal representative, conservator, legal representative, heirs, or legatees of a deceased or incompetent member.
(Acts 1993, No. 93-724, p. 1425, §34; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-34; amended and renumbered by Act 2009-513, p. 967, §234.)
(a) On application to a court of competent jurisdiction by any judgment creditor of a member or assignee, the court may charge the interest of the member or assignee with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of financial rights. This section shall be the sole and exclusive remedy of a judgment creditor with respect to the judgment debtor’s membership interest.
(b) This chapter does not deprive any member of the benefit of any exemption laws applicable to the member’s limited liability company interest.
(Acts 1993, No. 93-724, p. 1425, §35; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-35; amended and renumbered by Act 2009-513, p. 967, §234.)
(a) A person ceases to be a member of a limited liability company upon the occurrence of one or more of the following events:
(1) The member ceases to be a member by voluntary act as provided in subsection (d).
(2) The member ceases to be a member of the limited liability company as provided in Section 10A-5-6.03.
(3) The member is removed as a member in either of the following manners:
a. In accordance with the operating agreement.
b. Subject to contrary provisions in the operating agreement, when the member assigns all of the member’s interest in the limited liability company, by an affirmative vote of a majority in number of the members who have not assigned their interests.
(b) Subject to contrary provisions in the operating agreement, or written consent of all members at the time, a person ceases to be a member upon the occurrence of one or more of the following events listed in the following subdivision or paragraphs:
(1) The member:
a. Makes an assignment for the benefit of creditors.
b. Files a voluntary petition in bankruptcy.
c. Is adjudicated bankrupt or insolvent.
d. Files a petition or answer seeking for the member any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation.
e. Files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against the member in any proceeding in the nature of the proceedings listed in paragraph d.
f. Seeks, consents to, or acquiesces in the appointment of a trustee, receiver, or liquidator of the member or of all or any substantial part of the member’s properties.
(2) Any of the following time periods have elapsed:
a. 120 days have elapsed after the commencement of any proceeding against the member seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief under any statute, law, or regulation, unless the proceeding has been dismissed.
b. 90 days have elapsed after the appointment, without the consent of the member, of a trustee, receiver, or liquidator of the member or of all or any substantial part of the member’s properties, unless the appointment is vacated or stayed.
c. 90 days have elapsed after the expiration of any stay, unless the appointment is vacated.
(3) In the case of a member who is an individual:
a. The member dies.
b. A court of competent jurisdiction adjudicates the member incompetent to manage the member’s person or property.
(4) In the case of a member who is a trustee or is acting as a member by virtue of being a trustee of a trust, the termination of the trust, but not merely the substitution of a new trustee.
(5) In the case of a member that is a separate limited liability company, the dissolution and commencement of winding up of the separate limited liability company.
(6) In the case of a member that is a corporation:
a. The filing of articles of dissolution or the equivalent for the corporation.
b. The revocation of its charter and the lapse of 90 days after notice to the corporation of revocation without a reinstatement of its charter.
(7) In the case of an estate, the distribution by the fiduciary of the estate’s entire interest in the limited liability company.
(8) In the case of a limited liability company performing professional services, at the time a member’s license or registration to perform the professional services is terminated or suspended for a period of more than 12 months.
(9) In the case of a general partnership, a limited partnership, or a registered limited liability partnership, the dissolution and commencement of winding up of the partnership.
(c) The members may provide in the operating agreement for other events the occurrence of which result in a person ceasing to be a member of the limited liability company.
(d) Unless the operating agreement provides that a member has no power to cease being a member of a limited liability company by voluntary act, the member may do so at any time by giving notice as provided in the operating agreement, or, if there is no such provision, 30 days written notice to the other members. If the member has the power to cease being a member by a voluntary act but the cessation is a breach of the operating agreement, or the cessation occurs as a result of otherwise wrongful conduct of the member, the limited liability company may recover damages from the member whose membership has ceased for breach of the operating agreement, including the reasonable cost of obtaining replacement for the services the member was obligated to perform. Unless otherwise provided in the governing documents, in the case of a limited liability company for a definite term or particular undertaking, cessation of membership by voluntary act of a member before the expiration of that term is a breach of the governing documents.
(e) Upon a member’s cessation of membership each of the following applies:
(1) The member’s governance rights terminate.
(2) The member’s duty of loyalty under subsection (f) of Section 10A-5-3.03 terminates.
(3) The member’s duty of loyalty under subsection (f) of Section 10A-5-3.03 and duty of care under subsection (g) of Section 10A-5-3.03 continue only with regard to matters arising and events occurring before the member’s cessation of membership, unless the member participates in the winding up of the limited liability company’s business pursuant to Sections 10A-1-9.12 and 10A-5-7.03.
(4) The member’s duty of loyalty with respect to information shall be the same as that of a member who is not a manager under subdivision (1) of subsection (k) of Section 10A-5-3.03, unless the member participates in the winding up of the limited liability company’s business pursuant to Sections 10A-1-9.12 and 10A-5-7.03, in which event subdivision (3) of this subsection applies.
(Acts 1993, No. 93-724, p. 1425, §36; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-36; amended and renumbered by Act 2009-513, p. 967, §234.)
A limited liability company is dissolved and its affairs shall be wound up upon occurrence of the first of the following events:
(1) Events specified in the governing documents.
(2) Written consent of all members to dissolve.
(3) When there is no remaining member, unless either of the following applies:
a. The holders of all the financial rights in the limited liability company agree in writing, within 90 days after the cessation of membership of the last member, to continue the legal existence and business of the limited liability company and to appoint one or more new members.
b. The legal existence and business of the limited liability company is continued and one or more new members are appointed in the manner stated in the governing documents.
(4) When the limited liability company is not the successor limited liability company in the merger or consolidation with one or more limited liability companies or other entities.
(5) Entry of a decree of judicial dissolution under Section 10A-5-7.02.
(Acts 1993, No. 93-724, p. 1425, §37; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-37; amended and renumbered by Act 2009-513, p. 967, §236.)
On application by or for a member, the circuit court for the county in which the certificate of formation is filed may decree dissolution of a limited liability company whenever it is not reasonably practicable to carry on the business in conformity with the governing documents.
(Acts 1993, No. 93-724, p. 1425, §38; §10-12-38; amended and renumbered by Act 2009-513, p. 967, §236.)
(a) Except as otherwise provided in the governing documents, the members who have not wrongfully dissolved a limited liability company may wind up the limited liability company’s business and affairs.
(b) A person winding up a limited liability company’s business may: Preserve the company business or property as a going concern for a reasonable time; prosecute and defend actions and proceedings, whether civil, criminal, or administrative; settle and close the limited liability company’s business; dispose of and transfer property; discharge the limited liability company’s liabilities; distribute the assets of the limited liability company pursuant to Section 10A-5-7.05; and perform other necessary and appropriate acts.
(Acts 1993, No. 93-724, p. 1425, §39; §10-12-39; amended and renumbered by Act 2009-513, p. 967, §236.)
(a) A dissolved limited liability company continues its existence but may not carry on any business except that necessary or appropriate to wind up and liquidate its business and affairs.
(b) Dissolution of a limited liability company does not:
(1) Transfer title to the limited liability company assets.
(2) Terminate or suspend a proceeding pending by or against the limited liability company on the effective date of dissolution.
(3) Terminate the authority of the registered agent of the limited liability company.
(Acts 1993, No. 93-724, p. 1425, §40; §10-12-40; amended and renumbered by Act 2009-513, p. 967, §236.)
Upon the winding up of a limited liability company, the assets of the limited liability company shall be distributed in the following order of priority:
(1) To creditors, including members who are creditors to the extent allowed by Section 10A-5-3.01 or otherwise permitted by law, in order of priority as provided by law, except those liabilities to members of the limited liability company for interim distributions or on account of their contributions.
(2) Except as otherwise provided in the governing documents, to members of the limited liability company and former members for interim distributions and in respect of their contributions.
(3) Except as otherwise provided in the governing documents, to members first for the return of their contributions and second with respect to their interests in the limited liability company, in the proportions in which the members share in distributions.
(Acts 1993, No. 93-724, p. 1425, §41; §10-12-41; amended and renumbered by Act 2009-513, p. 967, §236.)
(a) After the dissolution of the limited liability company pursuant to Section 10A-5-7.01, the limited liability company shall file articles of dissolution in the office of the judge of probate of the county in which the certificate of formation was filed. The articles of dissolution shall set forth:
(1) The name of the limited liability company.
(2) The date of filing its certificate of formation.
(3) The reason for filing the articles of dissolution.
(4) The effective date of the articles of dissolution, which shall be a date certain, if they are not to be effective immediately.
(5) Any other information the members or managers filing the articles deem appropriate.
(b) The articles of dissolution and two copies shall be delivered to the judge of probate. If the judge of probate finds that the articles of dissolution conform to law and that all fees prescribed in this chapter have been paid, the judge of probate shall:
(1) Endorse on the articles of dissolution and on each copy the word “Filed” and the hour, day, month, and year of the filing.
(2) File the articles of dissolution in the office of the judge of probate and certify two copies.
(3) Issue a certificate of dissolution to which a certified copy of the articles of dissolution shall be affixed, and return the certificate of dissolution with the certified copy of the articles of dissolution affixed to the representative of the dissolved limited liability company.
(4) Within 10 days after the issuance of a certificate of dissolution, transmit to the Secretary of State a certified copy of the articles of dissolution, indicating the place, date, and time of filing of the certificate.
(Acts 1993, No. 93-724, p. 1425, §42; §10-12-42; amended and renumbered by Act 2009-513, p. 967, §236.)
(a) A limited liability company shall have the power to render professional services if each member or employee who renders professional services in Alabama is licensed or registered to render those professional services pursuant to applicable Alabama law and if the limited liability company complies with the limitations of this section.
(b) Every individual who renders professional services as a member or as an employee of a limited liability company shall be liable for any negligent or wrongful act or omission in which the individual personally participates to the same extent the individual would be liable if the individual rendered the services as a sole practitioner.
(c) The personal liability of a member, manager, or other employee of any limited liability company engaged in providing professional services shall be no greater than that of a shareholder, employee, director, or officer of a corporation organized under the Alabama Business Corporation Law or any successor act.
(d) The personal liability of a member, manager, or employee of a foreign limited liability company shall be determined under the law of the jurisdiction in which it is organized.
(e) Nothing in this chapter shall restrict or limit in any manner the authority or duty of a licensing authority with respect to individuals rendering a professional service within the jurisdiction of the licensing authority. Nothing in this chapter shall restrict or limit any law, rule, or regulation pertaining to standards of professional conduct.
(f) Nothing in this chapter shall limit the authority of a licensing authority to impose requirements in addition to those stated in this chapter on any limited liability company or foreign limited liability company rendering professional services within the jurisdiction of the licensing authority.
(g) A limited liability company organized to render professional services under this chapter may render only one specific type of professional services, and services ancillary to them, and may not engage in any business other than rendering the professional services which it was organized to render, and services ancillary to them. In addition, a limited liability company organized to render professional services shall be subject to the restrictions imposed on professional corporations by the Alabama Professional Corporation Law, as amended from time to time.
(h) A limited liability company organized to render professional services, domestic or foreign, may render professional services in Alabama only through individuals permitted to render those services in Alabama; but nothing in this chapter shall be construed to require that any individual who is employed by a limited liability company rendering professional services be licensed to perform services for which no license is otherwise required or to prohibit the rendering of professional services by a licensed individual acting in an individual capacity, notwithstanding that the individual may be a member, manager, employee or agent of a domestic or foreign limited liability company rendering professional services.
(i) A member’s interest in a limited liability company organized to render professional services may be voluntarily transferred only to a person who is licensed or registered to render the professional services for which the company was organized.
(j) If a membership interest is transferred by gift or inheritance to a person who is not licensed or registered to render the professional services for which the limited liability company was organized or if a member’s license or registration to perform the professional services for which the limited liability company was organized is terminated or suspended for a period of more than 12 months, the person or member shall not be treated as owning financial rights or an ownership interest in the limited liability company and shall be entitled only to receive the fair value of the membership interest determined in the same manner as the fair value of interests in professional corporations is determined under Section 10A-4-3.02.
(Acts 1993, No. 93-724, p. 1425, §45; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-45; amended and renumbered by Act 2009-513, p. 967, §239.)
(a) Pursuant to any agreement, a domestic limited liability company may merge or consolidate with or into one or more limited liability companies or other business entities formed or organized under the laws of this state, any other state, the United States, or any foreign jurisdiction, with the domestic limited liability company or the other business entity being the surviving or resulting domestic limited liability company or other business entity. Except as otherwise specifically provided for in the operating agreement, a merger shall be approved by each domestic limited liability company which is to merge by all the members at the time approval of the merger is voted on.
(b) Notwithstanding prior approval, an agreement of merger may be terminated prior to filing articles of merger with the Secretary of State or amended pursuant to a provision for the termination or amendment contained in the agreement of merger.
(Acts 1993, No. 93-724, p. 1425, §54; §10-12-54; amended and renumbered by Act 2009-513, p. 967, §242.)
(a) If a domestic limited liability company is merging under this chapter, the domestic limited liability company or other business entity surviving or resulting from the merger shall file articles of merger in the Office of the Secretary of State. If a domestic limited liability company is filing the articles of merger, the articles of merger shall be signed by at least one member of the domestic limited liability company, and if another business entity is filing the articles of merger, the articles of merger shall be signed by a person authorized by the other business entity. The articles of merger shall state all of the following:
(1) The name, jurisdiction, and date of formation or organization of each of the domestic limited liability companies or other business entities that are to merge.
(2) That an agreement of merger has been approved and executed by each of the domestic limited liability companies or other business entities that are to merge.
(3) The name of the surviving or resulting domestic limited liability company or other business entity.
(4) The future effective date or time, which shall be a date or time certain, of the merger if it is not to be effective upon the filing of the articles of merger.
(5) That the agreement of merger is on file at a place of business of the surviving or resulting domestic limited liability company or other business entity, and shall state the street address of that place of business.
(6) That a copy of the agreement of merger will be furnished by the surviving or resulting domestic limited liability company or other business entity, on request and without cost, to any member of any domestic limited liability company or any person holding an interest in any other business entity which is a party to the merger.
(7) If the surviving or resulting entity is not a domestic limited liability company or other business entity organized under the laws of this state, a statement that the foreign business entity consents to service of process on it by registered mail addressed to the foreign business entity at the office required to be maintained in the state or other jurisdiction where it is organized by the laws of that state or, other jurisdiction, or, if not so required, at its principal office, if it has not appointed an agent under Section 10A-1-5.31 or if that agent cannot be found or served with the exercise of reasonable diligence.
(b) A merger shall be effective upon the filing in the Office of the Secretary of State of the articles of merger unless a future effective date or time is provided in the articles of merger, in which event the merger shall be effective at the future date or time specified.
(Acts 1993, No. 93-724, p. 1425, §55; Act 97-920, 1st Ex. Sess., p. 312, §1; §10-12-55; amended and renumbered by Act 2009-513, p. 967, §242.)
(a) When any merger has become effective under this chapter, for all purposes of the laws of the state, all the rights, privileges, and powers of each of the domestic limited liability companies and other business entities that have merged, and all property, real, personal, and mixed, and all debts due to any of the domestic limited liability companies and other business entities, as well as all other things and causes of action belonging to each of the domestic limited liability companies and other business entities, shall be vested in the surviving or resulting domestic limited liability company or other business entity, and shall thereafter be the property of the surviving or resulting domestic limited liability company or other business entity as they were of each of the domestic limited liability companies and other business entities that have merged. The title to any real property vested by deed or otherwise in any of the domestic limited liability companies and other business entities shall not revert or be in any way impaired by reason of this chapter.
(b) All rights of creditors and all liens upon any property of any of the domestic limited liability companies and other business entities shall be preserved unimpaired, and all debts, liabilities and duties of each of the domestic limited liability companies and other business entities that have merged shall attach to the surviving or resulting domestic limited liability company or other business entity, and may be enforced against it to the same extent as if the debts, liabilities, and duties had been incurred or contracted by it.
(c) Unless otherwise provided in the articles of merger, a merger, of a domestic limited liability company, including a domestic limited liability company which is not the surviving or resulting entity in the merger, shall not require the domestic limited liability company to wind up its business and affairs, or pay its liabilities and distribute its assets.
(Acts 1993, No. 93-724, p. 1425, §56; §10-12-56; amended and renumbered by Act 2009-513, p. 967, §242.)
The articles of merger required by this chapter to be filed with the Secretary of State shall also be recorded in the office of the judge of probate in the county in which the limited liability company is required to file its certificate of formation and in each county in which a limited liability company which is a party to the merger is required to file its certificate of formation; provided, however, that when the articles are filed by the Secretary of State, the matters covered by the articles shall be effective as stated therein, and a copy of the articles certified by the Secretary of State shall be conclusive evidence of the matters covered therein.
(Acts 1993, No. 93-724, p. 1425, §57; §10-12-57; amended and renumbered by Act 2009-513, p. 967, §242.)
To the extent applicable, the provisions and requirements of Article 11, commencing with Section 10A-2-11.01, of Chapter 2, relating to mergers of corporations, shall apply to mergers between corporations, domestic limited liability companies, and other business entities as defined by this chapter. Domestic limited liability companies and other business entities shall be treated as corporations for the purposes of applying the procedures, requirements, and effects prescribed in that article.
(Acts 1993, No. 93-724, p. 1425, §58; §10-12-58; amended and renumbered by Act 2009-513, p. 967, §242.)
The provisions of this article pertaining to mergers of limited liability companies are not exclusive. A domestic limited liability company may merge with or convert to another type of entity as permitted by Article 8 of Chapter 1.
(Act 2009-513, p. 967, §243.)
This chapter and Chapter 1, to the extent applicable to limited liability companies, shall be known and may be cited as the Alabama Limited Liability Company Law.
(Act 2014-144, p. 265, §1; Act 2019-304, §1.)
As used in this chapter, unless the context otherwise requires, the following terms mean:
(a) CERTIFICATE OF FORMATION, with respect to a limited liability company, means the certificate provided for by Section 10A-5A-2.01, and the certificate as amended or restated.
(b) CONSTITUENT LIMITED LIABILITY COMPANY means a constituent organization that is a limited liability company.
(c) CONSTITUENT ORGANIZATION means an organization that is party to a merger under Article 10.
(d) CONVERTED ORGANIZATION means the organization into which a converting organization converts pursuant to Article 10.
(e) CONVERTING LIMITED LIABILITY COMPANY means a converting organization that is a limited liability company.
(f) CONVERTING ORGANIZATION means an organization that converts into another organization pursuant to Article 10.
(g) DISQUALIFIED PERSON means any person who is not a qualified person.
(h) DISTRIBUTION except as otherwise provided in Section 10A-5A-4.06(e), means a transfer of money or other property from a limited liability company, or series thereof, to another person on account of a transferable interest.
(i) FOREIGN LIMITED LIABILITY COMPANY means a limited liability company governed by the laws of a jurisdiction other than this state which would be a limited liability company if governed by the laws of this state.
(j) GOVERNING STATUTE means the statute that governs an organization’s internal affairs.
(k) LIMITED LIABILITY COMPANY, except in the phrase “foreign limited liability company,” means an entity formed or existing under this chapter.
(l) LIMITED LIABILITY COMPANY AGREEMENT means any agreement (whether referred to as a limited liability company agreement, operating agreement or otherwise), written, oral or implied, of the member or members as to the activities and affairs of a limited liability company or series thereof. The limited liability company agreement of a limited liability company having only one member shall not be unenforceable by reason of there being only one person who is a party to the limited liability company agreement. The limited liability company agreement includes any amendments to the limited liability company agreement.
(m) MEMBER means a person admitted under Section 10A-5A-4.01 and not dissociated under Section 10A-5A-6.02.
(n) ORGANIZATION means a general partnership, including a limited liability partnership; limited partnership, including a limited liability limited partnership; limited liability company; business trust; corporation; nonprofit corporation; professional corporation; or any other person having a governing statute. The term includes domestic and foreign organizations whether or not organized for profit.
(o) ORGANIZATIONAL DOCUMENTS means:
(1) for a general partnership or foreign general partnership, its partnership agreement and if applicable, its registration as a limited liability partnership or a foreign limited liability partnership;
(2) for a limited partnership or foreign limited partnership, its certificate of formation and partnership agreement, or comparable writings as provided in its governing statute;
(3) for a limited liability company or foreign limited liability company, its certificate of formation and limited liability company agreement, or comparable writings as provided in its governing statute;
(4) for a business or statutory trust or foreign business or statutory trust its agreement of trust and declaration of trust, or comparable writings as provided in its governing statute;
(5) for a corporation for profit or foreign corporation for profit, its certificate of formation, bylaws, and other agreements among its shareholders that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(6) for a nonprofit corporation or foreign nonprofit corporation, its certificate of formation, bylaws, and other agreements that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(7) for a professional corporation or foreign professional corporation, its certificate of formation, bylaws, and other agreements among its shareholders that are authorized by its governing statute, or comparable writings as provided in its governing statute; and
(8) for any other organization, the basic writings that create the organization and determine its internal governance and the relations among the persons that own it, have an interest in it, or are members of it.
(p) PLAN OF MERGER. Except as set forth in Section 10A-5A-10.05(e), a plan of merger, whether referred to as a plan of merger, an agreement of merger, a merger agreement, a plan and agreement of merger, an agreement and plan of merger, or otherwise, means a writing described in Section 10A-5A-10.05 and includes any agreement, instrument, or other document referenced therein or associated therewith that sets forth the terms and conditions of the merger.
(q) QUALIFIED PERSON, with respect to a limited liability company rendering professional services in this state, means a person authorized by this state or a regulatory authority of this state to own a transferable interest in that limited liability company.
(r) SURVIVING ORGANIZATION means an organization into which one or more other organizations are merged under Article 10, whether the organization pre-existed the merger or was created pursuant to the merger.
(s) TRANSFER means an assignment, conveyance, deed, bill of sale, lease, mortgage, security interest, encumbrance, gift, or transfer by operation of law.
(t) TRANSFEREE means a person to which all or part of a transferable interest has been transferred, whether or not the transferor is a member.
(u) TRANSFERABLE INTEREST means a member’s right to receive distributions from a limited liability company or a series thereof.
(Act 2014-144, p. 265, §1; Act 2018-125, §6; Act 2021-299, §5; Act 2025-281, §5.)
(a) A person knows a fact when the person:
(1) has actual knowledge of it; or
(2) is deemed to know it under law other than this chapter.
(b) A person has notice of a fact when the person:
(1) knows of it;
(2) receives notification of it;
(3) has reason to know the fact from all of the facts known to the person at the time in question; or
(4) is deemed to have notice of the fact under subsection (d).
(c) A person notifies another of a fact by taking steps reasonably required to inform the other person in ordinary course, whether or not the other person knows the fact.
(d) A person is deemed to have notice of a limited liability company’s:
(1) matters included in the certificate of formation under Sections 10A-5A-2.01(a)(1), (a)(2), (a)(3), (a)(4) and, if applicable, (a)(5) upon filing;
(2) dissolution, 90 days after a statement of dissolution under Section 10A-5A-7.02(b)(1) becomes effective;
(3) merger or conversion, 90 days after a statement of merger or statement of conversion under Article 10 becomes effective; and
(4) reinstatement, 90 days after a certificate of reinstatement under Section 10A-5A-7.08 becomes effective.
(e) A member’s knowledge, notice or receipt of a notification of a fact relating to the limited liability company is not knowledge, notice or receipt of a notification of a fact by the limited liability company solely by reason of the member’s capacity as a member.
(Act 2014-144, p. 265, §1.)
(a) A limited liability company is a separate legal entity. A limited liability company’s status for tax purposes shall not affect its status as a separate legal entity formed under this chapter.
(b) A limited liability company shall possess and may exercise all the powers and privileges granted and enumerated by Chapter 1 or by any other law or by its limited liability company agreement, together with any powers incidental thereto, including those powers and privileges necessary or convenient to the conduct, promotion, or attainment of the business, purposes, or activities and affairs of the limited liability company.
(c) A limited liability company may carry on any lawful activity, whether or not for profit.
(d) A series established under this chapter has the power and capacity, in the series’ own name, to:
(1) sue and be sued;
(2) contract;
(3) hold and convey title to assets of the series, including real property, personal property, and intangible property; and
(4) grant liens and security interests in assets of the series.
(Act 2014-144, p. 265, §1.)
(a) The law of this state governs:
(1) the organization and internal affairs of a limited liability company, or series thereof;
(2) the liability of a member as a member for the debts, obligations, or other liabilities of a limited liability company, or series thereof;
(3) the authority of the members and agents of a limited liability company, or series thereof; and
(4) the availability and liability of the assets of a series or the limited liability company for the obligations of another series or the limited liability company.
(b) The law of the state or other jurisdiction under which a foreign limited liability company is formed governs:
(1) the organization and internal affairs of a foreign limited liability company, or series thereof;
(2) the liability of a member as a member for the debts, obligations, or other liabilities of a foreign limited liability company, or series thereof;
(3) the authority of the members and agents of a foreign limited liability company, or series thereof; and
(4) the availability and liability of the assets of a series or the foreign limited liability company for the obligations of another series or the foreign limited liability company.
(Act 2014-144, p. 265, §1; Act 2015-165, §1.)
(a) It is the policy of this chapter and this state to give maximum effect to the principles of freedom of contract and to the enforceability of limited liability company agreements.
(b) Unless displaced by particular provisions of this chapter, the principles of law and equity supplement this chapter.
(c) The rule that statutes in derogation of the common law are to be strictly construed shall have no application to this chapter.
(d) The use of any gender shall be applicable to all genders. The captions contained in this chapter are for purposes of convenience only and shall not control or affect the construction of this chapter.
(e) Sections 7-9A-406 and 7-9A-408 of the Uniform Commercial Code, and all successor statutes thereto, do not apply to any interest in a limited liability company, including all rights, powers, and interests arising under a limited liability company agreement or this chapter. This provision prevails over Sections 7-9A-406 and 7-9A-408 of the Uniform Commercial Code, and all successor statutes thereto, and is expressly intended to permit the enforcement of the provisions of a limited liability company agreement that would otherwise be ineffective under Sections 7-9A-406 and 7-9A-408 of the Uniform Commercial Code, and all successor statutes thereto.
(f) Division E of Article 3 of Chapter 1 of this title shall have no application to this chapter.
(g) The terms president, vice president, secretary, and treasurer, as defined in Chapter 1, shall have no application to this chapter.
(h) Section 10A-1-2.13(c) shall have no application to this chapter.
(i) Action validly taken pursuant to one provision of this chapter shall not be deemed invalid solely because it is identical or similar in substance to an action that could have been taken pursuant to some other provision of this chapter but fails to satisfy one or more requirements prescribed by such other provision.
(j) The provisions of this chapter shall apply whether a limited liability company has one member or more than one member.
(Act 2014-144, p. 265, §1; Act 2015-165, p. 436, §1; Act 2018-125, §6; Act 2025-281, §5.)
Subject to Section 10A-5A-3.01:
(a) The terms “partnership” and “limited partnership,” when used in any chapter or title other than the Alabama Limited Liability Company Law of 2014, the Alabama General Partnership Law, and the Alabama Limited Partnership Law, and any successors of those laws, include a limited liability company organized under this chapter, unless the context requires otherwise.
(b) Notwithstanding subsection (a), for purposes of taxation, other than Chapter 14A of Title 40, a limited liability company or foreign limited liability company shall be treated as a partnership unless it is classified otherwise for federal income tax purposes, in which case it shall be classified in the same manner as it is for federal income tax purposes.
(Act 2014-144, p. 265, §1; Act 2015-165, §1.)
(a) Except as otherwise provided in subsections (b) and (c):
(1) the limited liability company agreement governs relations among the members as members and between the members and the limited liability company; and
(2) to the extent the limited liability company agreement does not otherwise provide for a matter described in subsection (a)(1), this chapter governs the matter.
(b)(1) To the extent that, at law or in equity, a member or other person has duties, including fiduciary duties, to the limited liability company, or to another member or to another person that is a party to or is otherwise bound by a limited liability company agreement, the member’s or other person’s duties may be expanded or restricted or eliminated by a written limited liability company agreement, but the implied contractual covenant of good faith and fair dealing may not be eliminated.
(2) A written limited liability company agreement may provide for the limitation or elimination of any and all liabilities for breach of contract and breach of duties, including fiduciary duties, of a member or other person to a limited liability company or to another member or to another person that is a party to or is otherwise bound by a limited liability company agreement, but a limited liability company agreement may not limit or eliminate liability for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing.
(3) A member or other person shall not be liable to a limited liability company or to another member or to another person that is a party to or is otherwise bound by a limited liability company agreement for breach of fiduciary duty for the member’s or other person’s good faith reliance on the limited liability company agreement.
(4) A limited liability company agreement may provide any or all of the following:
(A) a member, dissociated member, or transferee who fails to perform in accordance with, or to comply with the terms and conditions of, the limited liability company agreement shall be subject to specified penalties or specified consequences;
(B) at the time or upon the happening of events specified in the limited liability company agreement, a member, dissociated member, or transferee may be subject to specified penalties or specified consequences; and
(C) subject to Section 10A-5A-1.08(c), an act or transaction under the limited liability company agreement by the limited liability company, a member, dissociated member, or transferee is void or voidable.
(5) A penalty or consequence that may be specified under paragraph (4) of this subsection may include and take the form of reducing or eliminating the defaulting member’s or transferee’s proportionate interest in a limited liability company, subordinating the member’s or transferee’s transferable interest to that of non-defaulting members or transferees, forcing a sale of that transferable interest, forfeiting the defaulting member’s or transferee’s transferable interest, the lending by other members or transferees of the amount necessary to meet the defaulting member’s or transferee’s commitment, a fixing of the value of the defaulting member’s or transferee’s transferable interest by appraisal or by formula and redemption or sale of the transferable interest at that value, or other penalty or consequence.
(6) A written limited liability company agreement may supersede, in whole or in part, the provisions of Division C of Article 3 of Chapter 1.
(c) A limited liability company agreement may not:
(1) vary the nature of the limited liability company as a separate legal entity under Section 10A-5A-1.04(a);
(2) vary the law applicable under Section 10A-5A-1.05;
(3) restrict the rights under this chapter of a person other than a member, dissociated member, or transferee;
(4) vary the power of the court under Section 10A-5A-2.05;
(5) eliminate the implied contractual covenant of good faith and fair dealing as provided under Section 10A-5A-1.08(b)(1);
(6) eliminate or limit the liability of a member or other person for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing as provided under Section 10A-5A-1.08(b)(2);
(7) waive the requirements of Section 10A-5A-4.04(c);
(8) vary the law applicable under Section 10A-5A-4.06(c);
(9) reduce the limitations period specified under Section 10A-5A-4.06(d) for an action commenced under other applicable law;
(10) waive the prohibition on issuance of a certificate of a transferable interest in bearer form under Section 10A-5A-5.02(c);
(11) vary the power of a court to decree dissolution in the circumstances specified in Section 10A-5A-7.01(d) or in Section 10A-5A-11.09(e);
(12) vary the requirement to wind up a limited liability company’s activities and affairs as specified in Section 10A-5A-7.02(a);
(13) vary the provisions of Section 10A-5A-8.01;
(14) vary the right of a member under Section 10A-5A-10.09;
(15) waive the requirements of Section 10A-5A-11.02(b); or
(16) vary the provisions of Section 10A-5A-1.11(c), (d), or (e).
(Act 2014-144, p. 265, §1; Act 2024-413, §1.)
(a) A limited liability company is bound by and may enforce the limited liability company agreement, whether or not the limited liability company has itself manifested assent to the limited liability company agreement.
(b) A person that is admitted as a member of a limited liability company becomes a party to and assents to the limited liability company agreement except as provided in Section 10A-5A-4.04(c).
(c) Two or more persons intending to be the initial members of a limited liability company may make an agreement providing that upon the formation of the limited liability company, the agreement will become the limited liability company agreement. One person intending to be the initial member of a limited liability company may assent to terms providing that upon the formation of the limited liability company the terms will become the limited liability company agreement.
(Act 2014-144, p. 265, §1.)
(a) If a limited liability company agreement provides for the manner in which it may be amended, including by requiring the approval of a person who is not a party to the limited liability company agreement or the satisfaction of conditions, it may be amended only in that manner or as otherwise permitted by law, except that the approval of any person may be waived by that person and any conditions may be waived by all persons for whose benefit those conditions were intended.
(b) A limited liability company agreement may provide rights to any person, including a person who is not a party to the limited liability company agreement, to the extent set forth in the limited liability company agreement.
(c) The obligations of a limited liability company and its members to a person in the person’s capacity as a transferee or dissociated member are governed by the limited liability company agreement. A transferee and a dissociated member are bound by the limited liability company agreement.
(d) If a writing that has been delivered by a limited liability company for filing in accordance with Chapter 1 and has become effective conflicts with a provision of the limited liability company agreement:
(1) The limited liability company agreement prevails as to members, dissociated members, and transferees; and
(2) The writing prevails as to other persons to the extent they reasonably rely on the writing.
(Act 2014-144, p. 265, §1; Act 2016-379, §4.)
(a) If a limited liability company agreement provides that an act or transaction is void or voidable when taken, then that act or transaction may be ratified or waived by:
(1) the members or other persons entitled to ratify or waive that act or transaction under the limited liability company agreement;
(2) if the limited liability company agreement does not specify the approval required for the ratification or waiver, then those members or other persons entitled to approve the amendment of the limited liability company agreement; or
(3) if the limited liability company agreement does not specify the approval required for the amendment of the limited liability company agreement, then all of the members.
(b) If the void or voidable act or transaction was the issuance or transfer of any transferable interest, then for purposes of determining who may ratify or waive any act or transaction, the transferable interest purportedly issued or transferred shall be deemed not to have been issued or transferred.
(c) Any act or transaction ratified, or with respect to which the failure to comply with any requirements of the limited liability company agreement is waived, pursuant to this section shall be deemed validly taken at the time of the act or transaction.
(d) Upon application of the limited liability company, any member, or any person claiming to be substantially and adversely affected by a ratification or waiver pursuant to this section, the designated court, and if none, the circuit court for the county in which the limited liability company’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the limited liability company’s most recent registered office is located, may hear and determine the validity and effectiveness of the ratification of, or waiver with respect to, any void or voidable act or transaction effectuated pursuant to this section, and in any such application, the limited liability company shall be named as a party and service of the application upon the registered agent of the limited liability company shall be deemed to be service upon the limited liability company, and no other party need be joined in order for the court to adjudicate the validity and effectiveness of the ratification or waiver, and the court may make such order respecting further or other notice of the application as the court deems proper under the circumstances; provided, that nothing herein limits or affects the right to serve process in any other manner now or hereafter provided by law, and this sentence is an extension of and not a limitation upon the right otherwise existing of service of legal process upon nonresidents.
(e) The provisions of this section shall not be construed to limit the accomplishment of a ratification or waiver of a void or voidable act or transaction by other means permitted by law.
(Act 2024-413, §2.)
(a) In order to form a limited liability company, one or more organizers must execute a certificate of formation and deliver it for filing to the filing officer provided for in subsection (e). Section 10A-1-3.05 shall not apply to this chapter. Instead, the certificate of formation shall set forth:
(1) the name of the limited liability company, which must comply with Article 5 of Chapter 1;
(2) the street address in this state, including the county, of the registered office required by Article 5 of Chapter 1;
(3) the name of the registered agent at the registered office required by Article 5 of Chapter 1;
(4) a statement that there is at least one member of the limited liability company;
(5) if applicable, a statement as provided in Section 10A-5A-11.02(b)(3); and
(6) any other matters the members determine to include therein.
(b) A limited liability company is formed when its certificate of formation becomes effective in accordance with Article 4 of Chapter 1.
(c) The fact that a certificate of formation has been filed and is effective in accordance with Article 4 of Chapter 1 is notice of the matters required to be included by subsections (a)(1), (a)(2), (a)(3), and (a)(4) and if applicable, (a)(5), but is not notice of any other fact.
(d) A limited liability company agreement shall be entered into either before, after, or at the time of the filing of the certificate of formation and, whether entered into before, after, or at the time of the filing, may be made effective as of the filing of the certificate of formation or at any other time or date provided in the limited liability company agreement.
(e) A certificate of formation shall be delivered for filing to the Secretary of State.
(Act 2014-144, p. 265, §1; Act 2020-73, §10; Act 2021-299, §5; Act 2024-413, §1.)
Division B of Article 3 of Chapter 1 shall not apply to this chapter. Instead:
(a) A certificate of formation may be amended at any time.
(b) A certificate of formation may be restated with or without amendment at any time.
(c) To amend its certificate of formation, a limited liability company must deliver a certificate of amendment for filing to the Secretary of State which certificate of amendment shall state:
(1) the name of the limited liability company;
(2) the unique identifying number or other designation as assigned by the Secretary of State; and
(3) the changes the amendment makes to the certificate of formation as most recently amended or restated.
(d) To restate its certificate of formation, a limited liability company must deliver a restated certificate of formation for filing to the Secretary of State. A restated certificate of formation must:
(1) be designated as such in the heading;
(2) state the limited liability company’s name;
(3) state the unique identifying number or other designation as assigned by the Secretary of State; and
(4) set forth any amendment or change effected in connection with the restatement of the certificate of formation.
Any restatement that effects an amendment shall be subject to any other provision of this chapter, not inconsistent with this section, which would apply if a separate certificate of amendment were filed to effect the amendment or change.
(e) The original certificate of formation, as theretofore amended, shall be superseded by the restated certificate of formation and thenceforth, the restated certificate of formation, including any further amendment or changes made thereby, shall be the certificate of formation of the limited liability company, but the original effective date of formation shall remain unchanged.
(f) An amended or restated certificate of formation may contain only provisions that would be permitted at the time of the amendment if the amended or restated certificate of formation were a newly filed original certificate of formation.
(g) A restated certificate of formation may omit any information that is not required to be in the certificate of formation under this chapter, including the name and address of the initial registered agent or registered office, if a statement of change is on file with the Secretary of State. Any omission other than the initial registered agent shall be an amendment to the certificate of formation, which amendment must be approved in accordance with the limited liability company agreement, and if the limited liability company agreement does not state the approval required for an amendment of the certificate of formation, then the amendment must be approved by all of the members.
(Act 2014-144, p. 265, §1; Act 2020-73, §10; Act 2021-299, §5; Act 2024-413, §1; Act 2025-281, §5.)
(a)(1) An amendment to a certificate of formation takes effect when the filing of the certificate of amendment takes effect as provided by Article 4 of Chapter 1.
(2) An amendment to a certificate of formation does not affect:
(i) an existing cause of action in favor of or against the limited liability company for which the certificate of amendment is sought;
(ii) a pending suit to which the limited liability company is a party; or
(iii) an existing right of a person other than an existing member.
(3) If the name of a limited liability company is changed by amendment, an action brought by or against the limited liability company in the former name of that limited liability company does not abate because of the name change.
(b)(1) A restated certificate of formation takes effect when the filing of the restated certificate of formation takes effect as provided by Article 4 of Chapter 1.
(2) On the date and time the restated certificate of formation takes effect, the original certificate of formation and each prior amendment or restatement of the certificate of formation is superseded and the restated certificate of formation is the effective certificate of formation.
(3) Subdivisions (1) and (2) apply to an amendment effected by a restated certificate of formation.
(Act 2014-144, p. 265, §1; Act 2023-503, §5.)
(a) A writing delivered to the Secretary of State for filing pursuant to this chapter must be signed as provided by this section.
(1) A limited liability company’s initial certificate of formation must be signed by at least one organizer.
(2) A writing signed on behalf of a limited liability company must be signed by a person authorized by the limited liability company.
(3) A writing filed on behalf of a dissolved limited liability company that has no members must be signed by the person winding up the limited liability company’s activities and affairs under Section 10A-5A-7.03 or a person appointed or designated under Section 10A-5A-7.03 to wind up those activities and affairs.
(4) Any other writing must be signed by the person on whose behalf the writing is delivered to the Secretary of State.
(b) Any writing to be filed under this chapter may be signed by an agent, including an attorney-in-fact. Powers of attorney relating to the signing of the writing need not be delivered to the Secretary of State.
(Act 2014-144, p. 265, §1; Act 2020-73, §10.)
(a) If a person required by this chapter to sign a writing or deliver a writing to a filing officer for filing under this chapter does not do so, any other person that is aggrieved by that failure may petition the designated court, and if none, the circuit court for the county in which the limited liability company’s principal office within this state is located, and if the limited liability company does not have a principal office within this state then the circuit court for the county in which the limited liability company’s most recent registered office is located, to order:
(1) the person to sign the writing;
(2) the person to deliver the writing to the filing officer for filing; or
(3) the filing officer to file the writing unsigned.
(b) If a petitioner under subsection (a) is not the limited liability company or foreign limited liability company to whom the writing pertains, the petitioner shall make the limited liability company or foreign limited liability company a party to the action. A person aggrieved under subsection (a) may seek the remedies provided in subsection (a) in a separate action against the person required to sign or deliver the writing or as a part of any other action concerning the limited liability company or foreign limited liability company in which the person required to sign or deliver the writing is made a party.
(c) A writing filed unsigned pursuant to this section is effective without being signed.
(d) A court may award reasonable expenses, including reasonable attorneys’ fees, to the party or parties who prevail, in whole or in part, with respect to any claim made under subsection (a).
(Act 2014-144, p. 265, §1; Act 2020-73, §10.)
(a) The Secretary of State, upon request and payment of the requisite fee, shall furnish to any person a certificate of existence for a limited liability company if the writings filed in the office of the Secretary of State show that the limited liability company has been formed under the laws of this state. A certificate of existence shall reflect only the information on file with the Secretary of State. A certificate of existence must state:
(1) the limited liability company’s name;
(2) that the limited liability company was formed under the laws of this state, the date of formation, and the filing office in which the certificate of formation was filed;
(3) whether the limited liability company has delivered to the Secretary of State for filing a statement of dissolution;
(4) whether the limited liability company has delivered to the Secretary of State for filing a certificate of reinstatement;
(5) the unique identifying number or other designation as assigned by the Secretary of State; and
(6) other facts of record in the office of the Secretary of State that are specified by the person requesting the certificate.
(b) The Secretary of State, upon request and payment of the requisite fee, shall furnish to any person a certificate of qualification for a foreign limited liability company if the writings filed in the office of the Secretary of State show that the Secretary of State has filed an application for registration for authority to conduct activities and affairs in this state and the registration has not been revoked, withdrawn, or terminated. A certificate of qualification must state:
(1) the foreign limited liability company’s name and any alternate name adopted for use in this state;
(2) that the foreign limited liability company is authorized to conduct activities and affairs in this state;
(3) that the Secretary of State has not revoked the foreign limited liability company’s registration;
(4) that the foreign limited liability company has not filed with the Secretary of State a certificate of withdrawal or otherwise terminated its registration;
(5) the unique identifying number or other designation as assigned by the Secretary of State; and
(6) other facts of record in the office of the Secretary of State that are specified by the person requesting the certificate.
(c) Subject to any qualification stated in the certificate, a certificate of existence or certificate of qualification issued by the Secretary of State is conclusive evidence that the limited liability company is in existence or the foreign limited liability company is authorized to conduct activities and affairs in this state.
(Act 2014-144, p. 265, §1; Act 2020-73, §10.)
A member of a limited liability company is not liable, solely by reason of being a member, for a debt, obligation, or liability of the limited liability company or a series thereof, whether arising in contract, tort, or otherwise or for the acts or omissions of any other member, agent, or employee of the limited liability company or a series thereof.
(Act 2014-144, p. 265, §1.)
No person shall have the power to bind the limited liability company, or a series thereof, except:
(a) to the extent the person is authorized to act as the agent of the limited liability company or a series thereof under or pursuant to the limited liability company agreement;
(b) to the extent the person is authorized to act as the agent of the limited liability company or a series thereof in accordance with Sections 10A-5A-4.07, 10A-5A-7.03, or 10A-5A-11.11; or
(c) to the extent provided by law other than this chapter.
(Act 2014-144, p. 265, §1; Act 2024-413, §1.)
(a) The initial member or members of a limited liability company are admitted as a member or members upon the formation of the limited liability company.
(b) After formation of a limited liability company, a person is admitted as a member of the limited liability company:
(1) as provided in the limited liability company agreement;
(2) as the result of a transaction effective under Article 10 of this chapter or Article 8 of Chapter 1;
(3) with the consent of all the members; or
(4) as provided in Section 10A-5A-7.01(c)(1) or (c)(2).
(c) A person may be admitted as a member without acquiring a transferable interest and without making or being obligated to make a contribution to the limited liability company. A person may be admitted as the sole member without acquiring a transferable interest and without making or being obligated to make a contribution to the limited liability company.
(Act 2014-144, p. 265, §1; Act 2016-379, p. 934, §4; Act 2020-73, §10.)
A member has no interest in any specific property of a limited liability company or a series thereof.
(Act 2014-144, p. 265, §1.)
A contribution by a member may be made to a limited liability company as agreed upon by the members. A contribution by a member associated with a series may be made to that series as agreed upon by the members associated with that series.
(Act 2014-144, p. 265, §1.)
(a) A member’s obligation to make a contribution to a limited liability company, or a series thereof, is not excused by the member’s death, disability, or other inability to perform personally. If a member does not make a contribution required by an enforceable promise, the member or the member’s estate is obligated, at the election of the limited liability company, or series thereof, to contribute money equal to the value of the portion of the contribution that has not been made. The foregoing election shall be in addition to, and not in lieu of, any other rights, including the right to specific performance, that the limited liability company, or series thereof, may have under the limited liability company agreement or applicable law.
(b)(1) The obligation of a member to make a contribution to a limited liability company may be compromised only by consent of all the members. A conditional obligation of a member to make a contribution to a limited liability company may not be enforced unless the conditions of the obligation have been satisfied or waived as to or by that member. Conditional obligations include contributions payable upon a discretionary call of a limited liability company before the time the call occurs.
(2) The obligation of a member associated with a series to make a contribution to the series may be compromised only by consent of all the members associated with that series. A conditional obligation of a member to make a contribution to a series may not be enforced unless the conditions of the obligation have been satisfied or waived as to or by that member. Conditional obligations include contributions payable upon a discretionary call of that series before the time the call occurs.
(3) Subsection (b)(1) shall not apply to a member’s obligation to make a contribution to a series of a limited liability company.
(c) A promise by a member to make a contribution to a limited liability company, or a series thereof, is not enforceable unless set forth in a writing signed by the member.
(Act 2014-144, p. 265, §1.)
(a) (1) All members shall share equally in any distributions made by a limited liability company before its dissolution and winding up.
(2) A member has a right to a distribution before the dissolution and winding up of a limited liability company as provided in the limited liability company agreement. A decision to make a distribution before the dissolution and winding up of the limited liability company is a decision in the ordinary course of activities and affairs of the limited liability company. A member’s dissociation does not entitle the dissociated member to a distribution.
(3) A member does not have a right to demand and receive a distribution from a limited liability company in any form other than money. Except as otherwise provided in Section 10A-5A-7.06(c), a limited liability company may distribute an asset in kind if each member receives a percentage of the asset in proportion to the member’s share of distributions.
(4) If a member becomes entitled to receive a distribution, the member has the status of, and is entitled to all remedies available to, a creditor of the limited liability company with respect to the distribution.
(b)(1) All members associated with a series shall share equally in any distributions made by the series before its dissolution and winding up.
(2) A member associated with a series has a right to a distribution before the dissolution and winding up of the series as provided in the limited liability company agreement. A decision of the series to make a distribution before the dissolution and winding up of the series is a decision in the ordinary course of activities and affairs of the series. A member’s dissociation from a series with which the member is associated does not entitle the dissociated member to a distribution from the series.
(3) A member associated with a series does not have a right to demand and receive a distribution from the series in any form other than money. Except as otherwise provided in Section 10A-5A-11.14(c), a series may distribute an asset in kind if each member associated with the series receives a percentage of the asset in proportion to the member’s share of distributions from the series.
(4) If a member associated with a series becomes entitled to receive a distribution from the series, the member has the status of, and is entitled to all remedies available to, a creditor of the series with respect to the distribution.
(c) Subsection (a) shall not apply to a distribution made by a series.
(Act 2014-144, p. 265, §1.)
(a)(1) A limited liability company shall not make a distribution to a member to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the limited liability company, other than liabilities to members on account of their transferable interests and liabilities for which the recourse of creditors is limited to specific property of the limited liability company, exceed the fair value of the assets of the limited liability company, except that the fair value of the property that is subject to a liability for which recourse of creditors is limited shall be included in the assets of the limited liability company only to the extent that the fair value of the property exceeds that liability.
(2) A member who receives a distribution in violation of subsection (a)(1) or the limited liability company agreement, and who knew at the time of the distribution that the distribution violated subsection (a)(1) or the limited liability company agreement, shall be liable to the limited liability company for the amount of the distribution received by that member. A member who receives a distribution in violation of subsection (a)(1) or the limited liability company agreement, and who did not know at the time of the distribution that the distribution violated subsection (a)(1) or the limited liability company agreement, shall not be liable for the amount of the distribution.
(b)(1) A series shall not make a distribution to a member associated with the series to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the series, other than liabilities to members associated with the series on account of their transferable interests and liabilities for which the recourse of creditors is limited to specific property of the series, exceed the fair value of the assets of the series, except that the fair value of the property that is subject to a liability for which recourse of creditors is limited shall be included in the assets of the series only to the extent that the fair value of the property exceeds that liability.
(2) A member associated with a series who receives a distribution in violation of subsection (b)(1) or the limited liability company agreement, and who knew at the time of the distribution that the distribution violated subsection (b)(1) or the limited liability company agreement, shall be liable to that series for the amount of the distribution received by that member. A member associated with a series who receives a distribution in violation of subsection (b)(1) or the limited liability company agreement, and who did not know at the time of the distribution that the distribution violated subsection (b)(1) or the limited liability company agreement, shall not be liable for the amount of the distribution.
(3) Subsection (a) shall not apply to a distribution made by a series.
(c) Except as provided in subsection (d), this section shall not affect any obligation or liability of a member under other applicable law for the amount of a distribution.
(d) An action under this section or other applicable law is barred if not commenced within two years after the distribution.
(e) For purposes of Sections 10A-5A-4.06(a) and 10A-5A-4.06(b), distribution does not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of the limited liability company’s activities and affairs under a bona fide retirement plan or other benefits program.
(f) This section shall not apply to distributions made in accordance with Section 10A-5A-7.06 or Section 10A-5A-11.14.
(Act 2014-144, p. 265, §1; Act 2015-165, §1.)
(a) The limited liability company agreement of a limited liability company may provide that the activities and affairs of the limited liability company shall be under the direction, and subject to the oversight, of: (1) its members; (2) one or more managers; or (3) such other governance structure as provided in the limited liability company agreement. The limited liability company agreement of a limited liability company may provide that the activities and affairs of a series shall be under the direction, and subject to the oversight, of: (1) the members associated with that series; (2) one or more managers; or (3) such other governance structure as provided in the limited liability company agreement.
(b) If the limited liability company agreement does not specify who shall direct and oversee the activities and affairs of the limited liability company or a series thereof:
(1)(A) The activities and affairs of the limited liability company shall be under the direction, and subject to the oversight, of its members.
(B) The activities and affairs of a series shall be under the direction, and subject to the oversight, of the members associated with the series.
(C) Subsection (b)(1)(A) shall not apply to the activities and affairs of a series.
(2)(A) Except as provided in subsection (b)(3), a matter in the ordinary course of activities and affairs of the limited liability company may be decided by a majority of the members.
(B) Except as provided in subsection (b)(3), a matter in the ordinary course of activities and affairs of a series may be decided by a majority of the members associated with the series.
(C) Subsection (b)(2)(A) shall not apply to matters of a series.
(3)(A) The consent of all members is required to:
(i) amend the limited liability company agreement;
(ii) file a petition of the limited liability company for relief under Title 11 of the United States Code, or a successor statute of general application, or a comparable federal, state, or foreign law governing insolvency;
(iii) undertake any act outside the ordinary course of the limited liability company’s activities and affairs; and
(iv) undertake, authorize, or approve any other act or matter for which this chapter requires the consent of all members.
(B) The consent of all members associated with a series is required to:
(i) undertake any act outside the ordinary course of the series’ activities and affairs; and
(ii) undertake, authorize, or approve any other act or matter for which this chapter requires the consent of all the members associated with a series.
(c) Any matter requiring the consent of members may be decided without a meeting, and a member may appoint a proxy or other agent to consent or otherwise act for the member by signing an appointing writing, personally or by the member’s agent.
(d) This chapter does not entitle a member to remuneration for services performed for a limited liability company, except for reasonable compensation for services rendered in winding up the activities and affairs of the limited liability company.
(Act 2014-144, p. 265, §1.)
(a)(1) The duties a person who has the authority to direct and oversee the activities and affairs of a limited liability company owes to the limited liability company and to the members of the limited liability company include the duty of loyalty and the duty of care as described in subsections (b) and (d)(1).
(2) The duties a person who has the authority to direct and oversee the activities and affairs of a series of a limited liability company owes to that series and the members associated with that series include the duty of loyalty and the duty of care as described in subsections (c) and (d)(2).
(b) The duty of loyalty of a person described in subsection (a)(1) to a limited liability company and its members includes each of the following:
(1) To account to the limited liability company and to hold as trustee for it any property, profit, or benefit derived by that person in the conduct or winding up of the limited liability company’s activities and affairs or derived from a use by that person of the limited liability company’s property, including the appropriation of the limited liability company’s opportunity.
(2) To refrain from dealing with the limited liability company in the conduct or winding up of the limited liability company’s activities and affairs as or on behalf of a party having an interest adverse to the limited liability company.
(3) To refrain from competing with the limited liability company in the conduct of the limited liability company’s activities and affairs before the dissolution of the limited liability company.
(c) The duty of loyalty of a person described in subsection (a)(2) to a series of a limited liability company and the members associated with that series includes each of the following:
(1) To account to the series and to hold as trustee for it any property, profit, or benefit derived by that person in the conduct or winding up of the series’ activities and affairs or derived from a use by that person of the series’ property, including the appropriation of the series’ opportunity.
(2) To refrain from dealing with the series in the conduct or winding up of the series’ activities and affairs as or on behalf of a party having an interest adverse to the series.
(3) To refrain from competing with the series in the conduct of the series’ activities and affairs before the dissolution of the series.
(d)(1) The duty of care of a person described in subsection (a)(1) to a limited liability company and its members in the conduct or winding up of the limited liability company’s activities and affairs includes refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
(2) The duty of care of a person described in subsection (a)(2) to a series of a limited liability company and the members associated with that series in the conduct or winding up of that series’ activities and affairs includes refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
(e)(1) A person described in subsection (a)(1) shall discharge the duties to a limited liability company and its members under this chapter and under the limited liability company agreement and exercise any rights consistently with the implied contractual covenant of good faith and fair dealing.
(2) A person described in subsection (a)(2) shall discharge the duties to a series of a limited liability company and the members associated with that series under this chapter and under the limited liability company agreement and exercise any rights consistently with the implied contractual covenant of good faith and fair dealing.
(f) A person described in subsection (a) does not violate a duty or obligation under this chapter or under the limited liability company agreement merely because that person’s conduct furthers that person’s own interest.
(g)(1) Other than the implied contractual covenant of good faith and fair dealing, the only duty a member who does not have the authority to direct and oversee the activities and affairs of a limited liability company owes to a limited liability company or to the other members solely by reason of being a member is to not disclose or otherwise use information of the limited liability company to the detriment of the limited liability company or the other members.
(2) Other than the implied contractual covenant of good faith and fair dealing, the only duty a member associated with a series who does not have the authority to direct and oversee the activities and affairs of that series owes to that series or to the other members associated with that series solely by reason of being a member associated with that series is to not disclose or otherwise use information of that series to the detriment of that series or the other members associated with that series.
(h) When the authority of a person to direct and oversee the activities and affairs of a limited liability company is terminated, each of the following applies:
(1) Except as provided in subsection (h)(2), the person’s duties terminate.
(2) The person’s duties continue only with regard to matters arising and events occurring before the termination of the person’s authority.
(i) When the authority of a person to direct and oversee the activities and affairs of a series of a limited liability company is terminated, each of the following applies:
(1) Except as provided in subsection (i)(2), the person’s duties terminate.
(2) The person’s duties continue only with regard to matters arising and events occurring before the termination of the person’s authority.
(Act 2014-144, p. 265, §1.)
(a) Each limited liability company shall maintain the following records:
(1) A current list of the full name and last known business or residence street address of each member.
(2) A copy of the filed certificate of formation and all amendments thereto, together with executed copies of any powers of attorney pursuant to which any documents have been executed.
(3) Copies of the limited liability company’s federal, state, and local income tax returns and reports, if any, for the three most recent years.
(4) Copies of the then effective limited liability company agreement including any amendments thereto.
(5) Copies of any financial statements of the limited liability company for the three most recent years.
(b) Subject to subsection (g), a member may demand (i) on 10 days’ notice made in a writing received by the limited liability company, the records set forth in subsection (a) above, and (ii) on 30 days’ notice made in writing received by the limited liability company, any other books and records of the limited liability company, wherever situated, to inspect and copy for any proper purpose by the demanding member during regular business hours.
(c) Subject to subsection (g), on 30 days’ notice made in a writing received by a limited liability company, a dissociated member may inspect and copy, during regular business hours, at a reasonable location specified by the limited liability company, any record maintained by the limited liability company, to the extent the information pertains to the period during which the person was a member, was material to the person’s rights and duties under the limited liability company agreement or this chapter when the person was a member, and the person seeks the information in good faith and for a proper purpose.
(d) A limited liability company may charge a person that makes a demand under this section the reasonable costs of labor and material for copying.
(e) A member or dissociated member may exercise rights under this section through an agent or attorney, or in the case of an individual under legal disability, a legal representative. Any restriction or condition imposed by the limited liability company agreement or under subsection (g) applies both to the agent, attorney, or legal representative and to the member or dissociated member. If the demanding person’s agent or attorney is to inspect and copy the books and records of the limited liability company, the demand shall be accompanied by a power of attorney or other writing which authorizes the attorney or other agent to so act on behalf of the demanding person.
(f) The rights under this section do not extend to a transferee.
(g)(1) In addition to any restriction or condition stated in its limited liability company agreement, a limited liability company, as a matter within the ordinary course of its activities and affairs, may:
(A) impose reasonable restrictions and conditions on access to and use of information to be furnished under this section, including designating information confidential and imposing nondisclosure and safeguarding obligations on the recipient;
(B) keep confidential from the members and any other persons, for such period of time as the limited liability company deems reasonable, any information that the limited liability company reasonably believes to be in the nature of trade secrets or other information the disclosure of which the limited liability company in good faith believes is not in the best interest of the limited liability company or could damage the limited liability company or its activities and affairs, or that the limited liability company is required by law or by agreement with a third party to keep confidential; and
(C) redact portions of the records to be inspected and copied to the extent the portions so redacted are not directly related to the member’s or other person’s purpose.
(2) In any dispute concerning the reasonableness of a restriction under this subsection, the limited liability company has the burden of proving reasonableness.
(h) The rights under this section may be denied by the limited liability company if the limited liability company determines that the demanding person has within two years preceding his, her, or its demand improperly used any information secured through any prior examination of the records of the limited liability company.
(i) For purposes of this section, a proper purpose shall mean a purpose directly related to the member or dissociated member’s interest as a member or dissociated member, as the case may be; provided, however, that a demand shall not be for a proper purpose if the limited liability company reasonably determines that the demand is in connection with:
(1) an active or pending derivative proceeding in the right of the limited liability company under Article 9 of this chapter that is or is expected to be instituted or maintained by the member or the member’s affiliate; or
(2) an active or pending civil lawsuit to which the limited liability company, or its affiliate, and the member or dissociated member, or the affiliate thereof, are, or are expected to be, adversarial named parties.
(j) If a limited liability company does not within a reasonable time allow a person who complies with the requirements of this section to inspect and copy the records required by this section, the person who complies with this section may apply to the designated court, and if none, the circuit court for the county in which the limited liability company’s principal office is located in this state, and if none in this state, the circuit court for the county in which the limited liability company’s most recent registered office is located for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this subsection on an expedited basis. If the court orders inspection and copying of the records demanded under this section, it may impose reasonable restrictions on their confidentiality, use, or distribution by the demanding person and the court shall also order the limited liability company to pay the demanding person’s expenses incurred to obtain the order unless the limited liability company establishes that the limited liability company refused inspection in good faith because the limited liability company had:
(1) a reasonable basis for doubt about the right of the demanding person to inspect the records demanded; or
(2) required reasonable restrictions on the confidentiality, use, or distribution of the records demanded to which the demanding person had been unwilling to agree. If the limited liability company has declined to deliver or make available the records because the demanding person had been unwilling to agree to restrictions proposed by the limited liability company on the confidentiality, use, or distribution of the records, the limited liability company shall have the burden of demonstrating that the restrictions proposed by the limited liability company were reasonable.
(Act 2014-144, p. 265, §1; Act 2018-125, §6; Act 2026-495, §1.)
A limited liability company, or a series thereof, may indemnify and hold harmless a member or other person, pay in advance or reimburse expenses incurred by a member or other person, and purchase and maintain insurance on behalf of a member or other person.
(Act 2014-144, p. 265, §1.)
A member of a limited liability company shall be fully protected in relying in good faith upon the records of the limited liability company and upon information, opinions, reports, or statements presented by another member or agent of the limited liability company, or by any other person as to matters the member reasonably believes are within that other person’s professional or expert competence, including information, opinions, reports, or statements as to the value and amount of the assets, liabilities, profits, or losses of the limited liability company or a series thereof, or the value and amount of assets or reserves or contracts, agreements, or other undertakings that would be sufficient to pay claims and obligations of the limited liability company, or series thereof, or to make reasonable provision to pay those claims and obligations, or any other facts pertinent to the existence and amount of assets from which distributions to members or creditors might properly be paid.
(Act 2014-144, p. 265, §1.)
The only interest of a member that is transferable is the member’s transferable interest. A transferable interest is personal property.
(Act 2014-144, p. 265, §1.)
(a) A transfer, in whole or in part, of a transferable interest:
(1) is permissible;
(2)(A) does not by itself cause a member to cease to be a member of the limited liability company; and
(B) does not by itself cause a member to cease to be associated with a series of the limited liability company;
(3) does not by itself cause a dissolution and winding up of the limited liability company, or a series thereof; and
(4) subject to Section 10A-5A-5.04, does not entitle the transferee to:
(A) participate in the direction or oversight of the activities and affairs of the limited liability company, or a series thereof; or
(B) have access to records or other information concerning the activities and affairs of the limited liability company, or a series thereof.
(b) A transferee has the right to receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled.
(c) A transferable interest may be evidenced by a certificate of transferable interest issued by the limited liability company, or a series thereof. A limited liability company agreement may provide for the transfer of the transferable interest represented by the certificate and make other provisions with respect to the certificate. No certificate of transferable interest shall be issued in bearer form.
(d) A limited liability company, or a series thereof, need not give effect to a transferee’s rights under this section until the limited liability company, or a series thereof, has notice of the transfer.
(e) Except as otherwise provided in Sections 10A-5A-6.02(d)(2), 10A-5A-6.02(k), and 10A-5A-6.02(l) when a member transfers a transferable interest, the transferor retains the rights of a member other than the right to distributions transferred and retains all duties and obligations of a member.
(f) When a member transfers a transferable interest to a person that is admitted as a member with respect to the transferred interest, the transferee is liable for the member’s obligations under Sections 10A-5A-4.04, 10A-5A-4.06(a)(2), and 10A-5A-4.06(b)(2) to the extent that the obligations are known to the transferee when the transferee voluntarily accepts admission as a member.
(g) Notwithstanding anything in Title 43 to the contrary, a limited liability company agreement may provide that a transferable interest may or shall be transferred in whole or in part, with or without consideration, to one or more persons at the death of the holder of the transferable interest. Any transferable interest transferred pursuant to this subsection shall be subject to any outstanding charging order under Section 10A-5A-5.03. This subsection does not limit the rights of creditors of holders of transferable interests against transferees under this chapter or other laws of this state.
(Act 2014-144, p. 265, §1; Act 2025-281, §5.)
(a) On application to a court of competent jurisdiction by any judgment creditor of a member or transferee, the court may charge the transferable interest of the judgment debtor with payment of the unsatisfied amount of the judgment with interest. To the extent so charged and after the limited liability company has been served with the charging order, the judgment creditor has only the right to receive any distribution or distributions to which the judgment debtor would otherwise be entitled in respect of the transferable interest.
(b) A limited liability company, after being served with a charging order and its terms, shall be entitled to pay or deposit any distribution or distributions to which the judgment debtor would otherwise be entitled in respect of the charged transferable interest into the hands of the clerk of the court so issuing the charging order, and the payment or deposit shall discharge the limited liability company and the judgment debtor from liability for the amount so paid or deposited and any interest that might accrue thereon. Upon receipt of the payment or deposit, the clerk of the court shall notify the judgment creditor of the receipt of the payment or deposit. The judgment creditor shall, after any payment or deposit into the court, petition the court for payment of so much of the amount paid or deposited as is held by the court as may be necessary to pay the judgment creditor’s judgment. To the extent the court has excess amounts paid or deposited on hand after the payment to the judgment creditor, the excess amounts paid or deposited shall be distributed to the judgment debtor and the charging order shall be extinguished. The court, may in its discretion, order the clerk to deposit, pending the judgment creditor’s petition, any money paid or deposited with the clerk, in an interest bearing account at a bank authorized to receive deposits of public funds.
(c) A charging order constitutes a lien on the judgment debtor’s transferable interest.
(d) Subject to subsection (c):
(1) a judgment debtor that is a member retains the rights of a member and remains subject to all duties and obligations of a member; and
(2) a judgment debtor that is a transferee retains the rights of a transferee and remains subject to all duties and obligations of a transferee.
(e) This chapter does not deprive any member or transferee of the benefit of any exemption laws applicable to the member’s or transferee’s transferable interest.
(f) This section provides the exclusive remedy by which a judgment creditor of a member or transferee may satisfy a judgment out of the judgment debtor’s transferable interest and the judgment creditor shall have no right to foreclose, under this chapter or any other law, upon the charging order, the charging order lien, or the judgment debtor’s transferable interest. A judgment creditor of a member or transferee shall have no right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of a limited liability company. Court orders for actions or requests for accounts and inquiries that the judgment debtor might have made, are not available to the judgment creditor attempting to satisfy the judgment out of the judgment debtor’s transferable interest and may not be ordered by a court.
(Act 2014-144, p. 265, §1.)
If a member dies, the deceased member’s personal representative or other legal representative may:
(a) for the period of time, if any, that the deceased member’s personal representative or other legal representative holds the deceased member’s transferable interest:
(1) exercise the rights of a holder of transferable interests under this chapter;
(2) exercise the rights of a transferee under Section 10A-5A-5.02; and
(3) for purposes of settling the estate, exercise the rights of a current member under Section 10A-5A-4.09; and
(b) for the period of time that the deceased member’s personal representative or other legal representative does not hold the deceased member’s transferable interest, for purposes of settling the estate, exercise the rights of a dissociated member under Section 10A-5A-4.09.
(Act 2014-144, p. 265, §1; Act 2016-379, p. 934, §4; Act 2025-281, §5.)
(a) A person has the power to dissociate as a member.
(b) A person’s dissociation from a limited liability company is wrongful only if:
(1) it is in breach of an express provision of the limited liability company agreement;
(2) the person is expelled as a member by judicial determination under Section 10A-5A-6.02(e); or
(3) the person is dissociated by becoming a debtor in bankruptcy or making a general assignment for the benefit of creditors.
(c) A person that wrongfully dissociates as a member is liable to the limited liability company and, subject to Section 10A-5A-9.01, to the other members for damages caused by the dissociation. The liability is in addition to any other debt, obligation, or liability of the member to the limited liability company or the other members.
(Act 2014-144, p. 265, §1.)
A person is dissociated as a member from a limited liability company when any of the following occurs:
(a) the limited liability company has notice of the person’s express will to dissociate as a member, except that if the person specifies a dissociation date later than the date the limited liability company had notice, then the person is dissociated as a member on that later date;
(b) an event stated in the limited liability company agreement as causing the person’s dissociation occurs;
(c) the person is expelled as a member pursuant to the limited liability company agreement;
(d) the person is expelled as a member by the unanimous consent of the other members if:
(1) it is unlawful to carry on the limited liability company’s activities and affairs with the person as a member;
(2) there has been a transfer of all of the person’s transferable interest other than a transfer for security purposes;
(3) the person is an organization and, within 90 days after the limited liability company notifies the person that it will be expelled as a member because the person has filed a statement of dissolution or the equivalent, or its right to conduct activities and affairs has been suspended by its jurisdiction of formation, the statement of dissolution or the equivalent has not been revoked or its right to conduct activities and affairs has not been reinstated; or
(4) the person is an organization and, within 90 days after the limited liability company notifies the person that it will be expelled as a member because the person has been dissolved and its activities and affairs are being wound up, the organization has not been reinstated or the dissolution and winding up have not been revoked or cancelled;
(e) on application by the limited liability company, the person is expelled as a member by judicial order because the person:
(1) has engaged, or is engaging, in wrongful conduct that has adversely and materially affected, or will adversely and materially affect, the limited liability company’s activities and affairs;
(2) has willfully or persistently committed, or is willfully and persistently committing, a material breach of the limited liability company agreement or the person’s duty or obligation under this chapter or other applicable law; or
(3) has engaged, or is engaging, in conduct relating to the limited liability company’s activities and affairs that makes it not reasonably practicable to carry on the activities and affairs with the person as a member;
(f) in the case of a person who is an individual, the person dies, there is appointed a guardian or general conservator for the person or there is a judicial determination that the person has otherwise become incapable of performing the person’s duties as a member under this chapter or the limited liability company agreement;
(g) the person becomes a debtor in bankruptcy, executes an assignment for the benefit of creditors, or seeks, consents, or acquiesces to the appointment of a trustee, receiver, or liquidator of the person or of all or substantially all of the person’s property, but this subsection (g) shall not apply to a person who is the sole remaining member of a limited liability company;
(h) in the case of a person that is a trust or is acting as a member by virtue of being a trustee of a trust, the trust’s entire transferable interest in the limited liability company is distributed, but not solely by reason of the substitution of a successor trustee;
(i) in the case of a person that is an estate or is acting as a member by virtue of being a personal representative of an estate, the estate’s entire transferable interest in the limited liability company is distributed, but not solely by reason of the substitution of a successor personal representative;
(j) in the case of a member that is not an individual, the legal existence of the person otherwise terminates;
(k) the transfer of a member’s entire remaining transferable interest to another member; or
(l) the transfer of a member’s entire remaining transferable interest to a transferee upon the transferee’s becoming a member.
(Act 2014-144, p. 265, §1.)
(a) A person who has dissociated as a member shall have no right to participate in the direction and oversight of the activities and affairs of the limited liability company and is entitled only to receive the distributions to which that member would have been entitled if the member had not dissociated.
(b) A person’s dissociation as a member does not of itself discharge the person from any duty, debt, obligation, or liability to a limited liability company or the other members that the person incurred while a member.
(Act 2014-144, p. 265, §1.)
A limited liability company is dissolved and its affairs shall be wound up upon the occurrence of the first of the following events:
(a) An event or circumstance that the limited liability company agreement states causes dissolution.
(b) Consent of all members to dissolve.
(c) When there is no remaining member, unless either of the following applies:
(1) The holders of all the transferable interests in the limited liability company agree in writing, within 90 days after the dissociation of the last member, to continue the activities and affairs of the limited liability company and to appoint one or more new members.
(2) The activities and affairs of the limited liability company are continued and one or more new members are appointed in the manner stated in the limited liability company agreement.
(d) On application by a member, the entry of an order dissolving the limited liability company on the grounds that it is not reasonably practicable to carry on the limited liability company’s activities and affairs in conformity with the limited liability company agreement, which order is entered by the designated court, and if none, the circuit court for the county in which the limited liability company’s principal office within this state is located, and if the limited liability company does not have a principal office within this state then by the circuit court for the county in which the limited liability company’s most recent registered office is located.
(Act 2014-144, p. 265, §1; Act 2016-379, p. 934, §4; Act 2020-73, §10.)
(a) A dissolved limited liability company continues its existence as a limited liability company but may not carry on any activities and affairs except as is appropriate to wind up and liquidate its activities and affairs, including:
(1) collecting its assets;
(2) disposing of its properties that will not be distributed in kind to persons owning transferable interests;
(3) discharging or making provisions for discharging its liabilities;
(4) distributing its remaining property in accordance with Section 10A-5A-7.06; and
(5) doing every other act necessary to wind up and liquidate its activities and affairs.
(b) In winding up its activities and affairs, a limited liability company may:
(1) deliver for filing a statement of dissolution to the Secretary of State setting forth:
(A) The name of the limited liability company.
(B) The unique identifying number or other designation as assigned by the Secretary of State.
(C) That the limited liability company has dissolved.
(D) Any other information the limited liability company deems appropriate.
(2) preserve the limited liability company’s activities and affairs and property as a going concern for a reasonable time;
(3) prosecute, defend, or settle actions or proceedings, whether civil, criminal, or administrative;
(4) transfer the limited liability company’s assets;
(5) resolve disputes by mediation or arbitration; and
(6) merge or convert in accordance with Article 10 of this chapter or Article 8 of Chapter 1.
(c) The dissolution of a limited liability company does not:
(1) transfer title to the limited liability company’s property;
(2) prevent the commencement of a proceeding by or against the limited liability company in its limited liability company name;
(3) terminate, abate, or suspend a proceeding pending by or against the limited liability company on the effective date of dissolution;
(4) terminate the authority of its registered agent; or
(5) abate, suspend, or otherwise alter the application of Section 10A-5A-3.01.
(d) A statement of dissolution shall be deemed to be a filing instrument under Chapter 1.
(Act 2014-144, p. 265, §1; Act 2016-379, p. 934, §4; Act 2018-125, §6; Act 2020-73, §10; Act 2021-299, §5.)
(a) The person or persons designated in the limited liability company agreement to wind up the activities and affairs of the dissolved limited liability company shall wind up the activities and affairs of the limited liability company in accordance with Section 10A-5A-7.02. If no person or persons are designated in the limited liability company agreement to wind up the activities and affairs of the dissolved limited liability company, then the remaining members of the dissolved limited liability company shall wind up the activities and affairs of the limited liability company in accordance with Section 10A-5A-7.02. If no person or persons are designated in the limited liability company agreement to wind up the activities and affairs of the dissolved limited liability company and there are no remaining members of the dissolved limited liability company, then all of the holders of the transferable interests of the limited liability company, or their designee, shall wind up the activities and affairs of the limited liability company in accordance with Section 10A-5A-7.02.
(b) The designated court, and if none, the circuit court for the county in which the limited liability company’s principal office within this state is located, and if the limited liability company does not have a principal office within this state then the circuit court for the county in which the limited liability company’s most recent registered office is located, may order judicial supervision of the winding up of a dissolved limited liability company, including the appointment of a person to wind up the limited liability company’s activities and affairs:
(1) on application of a member, if the applicant establishes good cause;
(2) on application of a transferee, if:
(A) the limited liability company does not have any members; and
(B) within a reasonable time following the dissolution, no person having the authority to wind up the activities and affairs of the limited liability company pursuant to subsection (a) is winding up the activities and affairs of the limited liability company; or
(3) in connection with a proceeding under Section 10A-5A-7.01(d).
(Act 2014-144, p. 265, §1; Act 2020-73, §10.)
(a) A dissolved limited liability company may dispose of any known claims against it by following the procedures described in subsection (b) at any time after the effective date of the dissolution of the limited liability company.
(b) A dissolved limited liability company may give notice of the dissolution in a record to the holder of any known claim. The notice must:
(1) identify the dissolved limited liability company;
(2) describe the information required to be included in a claim;
(3) provide a mailing address to which the claim is to be sent;
(4) state the deadline, which may not be fewer than 120 days from the effective date of the notice, by which the dissolved limited liability company must receive the claim; and
(5) state that if not sooner barred, the claim will be barred if not received by the deadline.
(c) Unless sooner barred by any other statute limiting actions, a claim against a dissolved limited liability company is barred:
(1) if a claimant who was given notice under subsection (b) does not deliver the claim to the dissolved limited liability company by the deadline; or
(2) if a claimant whose claim was rejected by the dissolved limited liability company does not commence a proceeding to enforce the claim within 90 days from the effective date of the rejection notice.
(d) For purposes of this section, known claim or claim includes unliquidated claims, but does not include a contingent liability that has not matured so that there is no immediate right to bring suit or a claim based on an event occurring after the effective date of dissolution.
(e) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(Act 2014-144, p. 265, §1; Act 2021-299, §5.)
(a) A dissolved limited liability company may publish notice of its dissolution and request that persons with claims against the dissolved limited liability company present them in accordance with the notice.
(b) The notice authorized by subsection (a) must:
(1) be published at least one time in a newspaper of general circulation in the county in which the dissolved limited liability company’s principal office is located or, if it has none in this state, in the county in which the dissolved limited liability company’s most recent registered office is located;
(2) describe the information that must be included in a claim and provide a mailing address to which the claim is to be sent; and
(3) state that if not sooner barred, a claim against the dissolved limited liability company will be barred unless a proceeding to enforce the claim is commenced within two years after the publication of the notice.
(c) If a dissolved limited liability company publishes a newspaper notice in accordance with subsection (b), unless sooner barred by any other statute limiting actions, the claim of each of the following claimants is barred unless the claimant commences a proceeding to enforce the claim against the dissolved limited liability company within two years after the publication date of the newspaper notice:
(1) a claimant who was not given notice under Section 10A-5A-7.04(b);
(2) a claimant whose claim was timely sent to the dissolved limited liability company but not acted on by the dissolved limited liability company; and
(3) a claimant whose claim is contingent at the effective date of the dissolution of the limited liability company, or is based on an event occurring after the effective date of the dissolution of the limited liability company.
(d) A claim that is not barred under this section, any other statute limiting actions, or Section 10A-5A-7.04 may be enforced:
(1) against a dissolved limited liability company, to the extent of its undistributed assets; and
(2) except as provided in subsection (h), if the assets of a dissolved limited liability company have been distributed after dissolution, against the person or persons owning the transferable interests to the extent of that person’s proportionate share of the claim or of the assets distributed to that person after dissolution, whichever is less, but a person’s total liability for all claims under subsection (d) may not exceed the total amount of assets distributed to that person after dissolution of the limited liability company.
(e) A dissolved limited liability company that published a notice under this section may file an application with the circuit court for the county in which the dissolved limited liability company’s principal office is located in this state, and if the limited liability company does not have a principal office within this state, with the circuit court for the county in which the dissolved limited liability company’s most recent registered office is located, for a determination of the amount and form of security to be provided for payment of claims that are contingent or have not been made known to the dissolved limited liability company or that are based on an event occurring after the effective date of the dissolution of the limited liability company but that, based on the facts known to the dissolved limited liability company, are reasonably estimated to arise after the effective date of the dissolution of the limited liability company. Provision need not be made for any claim that is or is reasonably anticipated to be barred under subsection (c).
(f) Within 10 days after the filing of the application provided for in subsection (e), notice of the proceeding shall be given by the dissolved limited liability company to each potential claimant as described in subsection (e).
(g) The circuit court under subsection (e) may appoint a guardian ad litem to represent all claimants whose identities are unknown in any proceeding brought under this section. The reasonable fees and expenses of the guardian, including all reasonable expert witness fees, shall be paid by the dissolved limited liability company.
(h) Provision by the dissolved limited liability company for security in the amount and the form ordered by the circuit court under subsection (e) shall satisfy the dissolved limited liability company’s obligation with respect to claims that are contingent, have not been made known to the dissolved limited liability company, or are based on an event occurring after the effective date of the dissolution of the limited liability company, and those claims may not be enforced against a person owning a transferable interest to whom assets have been distributed by the dissolved limited liability company after the effective date of the dissolution of the limited liability company.
(i) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(j) If a claim has been satisfied, disposed of, or barred under Section 10A-5A-7.04, this section, or other law, the person or persons designated to wind up the affairs of a limited liability company, and the owners of the transferable interests receiving assets from the limited liability company, shall not be liable for that claim.
(Act 2014-144, p. 265, §1; Act 2020-73, §10; Act 2021-299, §5.)
Upon the winding up of a limited liability company, the assets shall be applied as follows:
(a) Payment, or adequate provision for payment, shall be made to creditors, including, to the extent permitted by law, members who are creditors, in satisfaction of liabilities of the limited liability company.
(b) After a limited liability company complies with subsection (a), any surplus must be distributed:
(1) first, to each person owning a transferable interest that reflects contributions made on account of the transferable interest and not previously returned, an amount equal to the value of the person’s unreturned contributions; and
(2) then to each person owning a transferable interest in the proportions in which the owners of transferable interests share in distributions before dissolution.
(c) If the limited liability company does not have sufficient surplus to comply with subsection (b)(1), any surplus must be distributed among the owners of transferable interests in proportion to the value of their respective unreturned contributions.
(Act 2014-144, p. 265, §1; Act 2021-299, §5.)
A limited liability company that has been dissolved may be reinstated upon compliance with the following conditions:
(a) the consent shall have been obtained from the members or other persons entitled to consent at the time that is:
(1) required for reinstatement under the limited liability company agreement; or
(2) if the limited liability company agreement does not state the consent required for reinstatement, sufficient for dissolution under the limited liability company agreement; or
(3) if the limited liability company agreement neither states the consent required for reinstatement nor for dissolution, sufficient for dissolution under this chapter;
(b) in the case of a written objection to reinstatement having been delivered to the limited liability company before or at the time of the consent required by subsection (a) by the members or other persons having authority under the limited liability company agreement to bring about or prevent dissolution of the limited liability company, those members or persons withdrawing that written objection effective at the time of the consent required by subsection (a);
(c) in the case of a limited liability company dissolved in a judicial proceeding initiated by one or more of the members, the consent of each of those members shall have been obtained and shall be included in the consent required by subsection (a); and
(d) the filing of a certificate of reinstatement in accordance with Section 10A-5A-7.08.
(Act 2014-144, p. 265, §1; Act 2021-299, §5.)
(a) In order to reinstate a limited liability company under this article, a certificate of reinstatement shall be delivered for filing to the Secretary of State which certificate of reinstatement shall have attached thereto a true and complete copy of the limited liability company’s certificate of formation. The certificate of reinstatement shall state:
(1) the name of the limited liability company before reinstatement;
(2) the name of the limited liability company following reinstatement, which limited liability company name shall comply with Section 10A-5A-7.09;
(3) the date of formation of the limited liability company;
(4) the date of dissolution of the limited liability company, if known;
(5) a statement that all applicable conditions of Section 10A-5A-7.07 have been satisfied;
(6) the address of the registered office and the name of the registered agent at that address in compliance with Article 5 of Chapter 1; and
(7) The unique identifying number or other designation as assigned by the Secretary of State.
(b) A limited liability company shall not be required to file a statement of dissolution in order to file a certificate of reinstatement.
(c) A certificate of reinstatement shall be deemed to be a filing instrument under Chapter 1.
(Act 2014-144, p. 265, §1; Act 2020-73, §10.)
The name of a limited liability company following reinstatement shall be determined as follows:
(a) If the limited liability company remains in the Secretary of State’s records as a limited liability company which has not been dissolved, then the name of the limited liability company following reinstatement shall be that limited liability company name at the time of reinstatement.
(b) If the limited liability company is listed in the Secretary of State’s records as a limited liability company that has been dissolved, then the name of a limited liability company following reinstatement shall be that limited liability company name at the time of reinstatement if that limited liability company name complies with Article 5 of Chapter 1 at the time of reinstatement. If that limited liability company name does not comply with Article 5 of Chapter 1, the name of the limited liability company following reinstatement shall be that limited liability company name followed by the word “reinstated.”
(c) A limited liability company shall not be required to file a statement of dissolution in order to retain or obtain the name of the limited liability company.
(Act 2014-144, p. 265, §1.)
(a) Subject to subsection (b), upon reinstatement, the limited liability company shall be deemed for all purposes to have continued its activities and affairs as if dissolution had never occurred; and each right inuring to, and each debt, obligation, and liability incurred by, the limited liability company after the dissolution shall be determined as if the dissolution had never occurred.
(b) The rights of persons acting in reliance on the dissolution before those persons had notice of the reinstatement shall not be adversely affected by the reinstatement.
(Act 2014-144, p. 265, §1.)
(a) A limited liability company shall have the power to render professional services if it complies with the rules of the licensing authority for such profession.
(b) Every individual who renders professional services as a member or as an employee of a limited liability company shall be liable for any negligent or wrongful act or omission in which the individual personally participates to the same extent the individual would be liable if the individual rendered the services as a sole practitioner.
(c) Except as otherwise provided in subsection (b), the personal liability of a member of any limited liability company engaged in providing professional services shall be governed by Section 10A-5A-3.01.
(d) Except as otherwise provided in subsection (b), the personal liability of a member, manager, or employee of a foreign limited liability company engaged in providing professional services shall be determined under the law of the jurisdiction in which the foreign limited liability company is organized.
(e) Nothing in this article shall restrict or limit in any manner the authority or duty of a licensing authority with respect to individuals rendering a professional service within the jurisdiction of the licensing authority. Nothing in this article shall restrict or limit any law, rule, or regulation pertaining to standards of professional conduct.
(f) Nothing in this article shall limit the authority of a licensing authority to impose requirements in addition to those stated in this chapter on any limited liability company or foreign limited liability company rendering professional services within the jurisdiction of the licensing authority.
(g) A member’s transferrable interest in a limited liability company organized to render professional services may be voluntarily transferred only to a qualified person.
(Act 2014-144, p. 265, §1; Act 2024-413, §1.)
(a) In the case of a limited liability company performing professional services, upon the death of a member, upon a member becoming a disqualified person, or upon a transferable interest being transferred by operation of law or court decree to a disqualified person, the transferable interest of the deceased member or of the disqualified person may be transferred to a qualified person and, if not so transferred, subject to Section 10A-5A-4.06, shall be purchased by the limited liability company as provided in this section.
(b) If the purchase price of the transferable interest is not determined in accordance with the limited liability company agreement, the limited liability company, within six months after the death or 30 days after the disqualification or transfer, as the case may be, shall make a written offer to pay for the transferable interest a specified price deemed by the limited liability company to be the fair value of the transferable interest as of the date of the death, disqualification, or transfer. The offer shall be delivered to the personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, and shall be accompanied by a balance sheet of the limited liability company, as of the latest available date and not more than 12 months prior to the making of the offer, and a profit and loss statement of the limited liability company for the 12 months’ period ended on the date of the balance sheet.
(c) If the fair value of the transferable interest is agreed upon between the personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, and the limited liability company, payment therefor shall be made within 90 days, or such other period as the parties may agree. Upon payment of the agreed value, the personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, shall cease to have any interest in, or claim to, the transferable interest.
(d) If the fair value of the transferable interest is not agreed upon between the personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, and the limited liability company within 30 days of the delivery of the written offer, then either party may commence a civil action in the designated court, and if none, in the circuit court for the county in which the limited liability company’s principal office within this state is located, and if the limited liability company does not have a principal office within this state, then in the circuit court for the county in which the limited liability company’s most recent registered office is located requesting that the fair value of the transferable interest be found and determined. If the limited liability company does not deliver a written offer in accordance with subsection (b), then the personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, may commence a civil action in the designated court, and if none, in the circuit court for the county in which the limited liability company’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the limited liability company’s most recent registered office is located requesting that the fair value of the transferable interest be found and determined. The personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, wherever residing, shall be made a party to the proceeding as an action against that person’s transferable interest quasi in rem. Service shall be made in accordance with the rules of civil procedure. The personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, shall be entitled to a judgment against the limited liability company for the amount of the fair value of that person’s transferable interest as of the date of death, disqualification, or transfer. The court, in its discretion, may order that the judgment be paid in installments and with interest and on terms as the court may determine. The court, if it so elects, may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers shall have the power and authority as shall be specified in the order of their appointment or an amendment thereof.
(e) The judgment shall include an allowance for interest at the rate the court finds to be fair and equitable in all the circumstances, from the date of death, disqualification, or transfer.
(f)(1) The court in a proceeding commenced under subsection (d) shall determine all court costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the court costs against the limited liability company, except that the court may assess court costs against the personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, in amounts which the court finds equitable, to the extent the court finds the personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this section.
(2) The court in a proceeding commenced under subsection (d) may also assess the expenses of the respective parties in amounts the court finds equitable:
(A) against the limited liability company and in favor of the personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, if the court finds the limited liability company did not substantially comply with the requirements of this section; or
(B) against either the limited liability company or the personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, in favor of the other party, if the court finds the party against whom expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this section.
(3) For purposes of this subsection (f), expenses means reasonable expenses of any kind that are incurred in connection with a proceeding brought under subsection (d).
(g) If the purchase or transfer of the transferable interest of a deceased member, a disqualified person, or a transferee is not completed within 12 months after the death of the deceased member or 12 months after the disqualification or transfer, as the case may be, the limited liability company shall forthwith cancel the transferable interest on its books and the personal representative of the estate of the deceased member, the disqualified person, or the transferee, as the case may be, shall have no further interest in the transferable interest other than that person’s right to payment for the transferable interest under this section.
(h) This section shall not require a limited liability company to purchase a transferable interest of a disqualified person if the disqualification is for less than 12 months from the date of disqualification. A limited liability company may require the disqualified person to sell the disqualified person’s transferable interest to the limited liability company upon any disqualification.
(i) Any provision of a limited liability company agreement regarding the purchase or transfer of a transferable interest of a limited liability company performing professional services shall be specifically enforceable in the courts of Alabama.
(j) Nothing in this section shall prevent or relieve a limited liability company from paying pension benefits or other deferred compensation for services rendered to or on behalf of a former member as otherwise permitted by law.
(Act 2014-144, p. 265, §1; Act 2020-73, §10; Act 2025-281, §5.)
(a) Subject to subsection (b), a member may maintain a direct action against another member or members or the limited liability company, or a series thereof, to enforce the member’s rights and otherwise protect the member’s interests, including rights and interests under the limited liability company agreement or this chapter or arising independently of the membership relationship.
(b) A member maintaining a direct action under subsection (a) must plead and prove an actual or threatened injury that is not solely the result of an injury suffered or threatened to be suffered by the limited liability company, or series thereof.
(c)(1) A member may maintain a direct action to enforce a right of a limited liability company if all members at the time of suit are parties to the action.
(2) A member associated with a series may maintain a direct action to enforce a right of the series if all members associated with the series at the time of suit are parties to the action.
(d) The accrual of, and any time limitation on, a right of action for a remedy under this section is governed by other law.
(Act 2014-144, p. 265, §1.)
(a) A member may commence or maintain a derivative action in the right of a limited liability company to enforce a right of the limited liability company by complying with this article.
(b) A member associated with a series of a limited liability company may commence or maintain a derivative action in the right of the series to enforce a right of the series by complying with this article.
(Act 2014-144, p. 265, §1.)
(a) A member may commence or maintain a derivative action in the right of the limited liability company only if the member:
(1) fairly and adequately represents the interests of the limited liability company in enforcing the right of the limited liability company; and
(2) either:
(A) was a member of the limited liability company at the time of the act or omission of which the member complains; or
(B) whose status as a member devolved upon the person by operation of law or pursuant to the terms of the limited liability company agreement from a person who was a member at the time of the act or omission of which the member complains.
(b) A member associated with a series of a limited liability company may commence or maintain a derivative action in the right of the series only if the member:
(1) fairly and adequately represents the interests of the series in enforcing the right of the series; and
(2) either:
(A) was associated with the series at the time of the act or omission of which the member complains; or
(B) whose status as a member associated with the series devolved upon the person by operation of law or pursuant to the terms of the limited liability company agreement from a person who was a member associated with the series at the time of the act or omission of which the member complains.
(Act 2014-144, p. 265, §1.)
A member may commence a derivative action in the right of the limited liability company, or a series thereof, if:
(a) the member first makes a written demand upon the limited liability company or the series, as the case may be, to bring an action to enforce the right and the limited liability company or the series, as the case may be, does not bring the action within a reasonable time; or
(b) a demand under subsection (a) would be futile.
(Act 2014-144, p. 265, §1.)
In a derivative action, the complaint must state with particularity:
(a) the date and content of plaintiff’s demand and the response by the limited liability company or the series, as the case may be, to the demand; or
(b) why the demand should be excused as futile.
(Act 2014-144, p. 265, §1.)
For the purpose of allowing the limited liability company or the series thereof, as the case may be, time to undertake an inquiry into the allegations made in the demand or complaint commenced pursuant to this article, the court may stay any derivative action for the period the court deems appropriate.
(Act 2014-144, p. 265, §1.)
A derivative action may not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to members of the limited liability company or the members associated with the series of the limited liability company, as the case may be, in such manner as the court directs.
(Act 2014-144, p. 265, §1.)
(a) Except as otherwise provided in subsection (b):
(1) any proceeds or other benefits of a derivative action, whether by judgment, compromise, or settlement, belong to the limited liability company or series thereof, as the case may be, and not to the derivative plaintiff; and
(2) if the derivative plaintiff receives any proceeds, the derivative plaintiff shall immediately remit them to the limited liability company or series thereof, as the case may be.
(b) If a derivative action is successful in whole or in part, the court may award the plaintiff reasonable expenses, including reasonable attorney’s fees, from the recovery of the limited liability company or the series thereof, as the case may be.
(Act 2014-144, p. 265, §1.)
In any derivative action in the right of a foreign limited liability company, or a series thereof, the right of a person to commence or maintain a derivative action in the right of a foreign limited liability company, or a series thereof, and any matters raised in the action covered by Sections 10A-5A-9.02 through 10A-5A-9.08 shall be governed by the law of the jurisdiction under which the foreign limited liability company was formed; except that any matters raised in the action covered by Sections 10A-5A-9.06, 10A-5A-9.07, and 10A-5A-9.08 shall be governed by the law of this state.
(Act 2014-144, p. 265, §1.)
(a) An organization other than a limited liability company may convert to a limited liability company, and a limited liability company may convert to an organization other than a limited liability company pursuant to this section, Sections 10A-5A-10.02 through 10A-5A-10.03, and a plan of conversion, if:
(1) the governing statute of the organization that is not a limited liability company authorizes the conversion;
(2) the law of the jurisdiction governing the converting organization and the converted organization does not prohibit the conversion; and
(3) the converting organization and the converted organization each comply with the governing statute and organizational documents applicable to that organization in effecting the conversion.
(b) A plan of conversion must be in writing and must include:
(1) the name, type of organization, and mailing address of the principal office of the converting organization, and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;
(2) the name, type of organization, and mailing address of the principal office of the converted organization after conversion;
(3) the terms and conditions of the conversion, including the manner and basis for converting interests in the converting organization into any combination of money, interests in the converted organization, and other consideration allowed in Section 10A-5A-10.01(c); and
(4) the organizational documents of the converted organization.
(c) In connection with a conversion, rights or securities of or interests in the converting organization may be exchanged for or converted into cash, property, or rights or securities of or interests in the converted organization, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, or rights or securities of or interests in another organization or may be cancelled.
(d) At the time of the approval of the plan of conversion in accordance with Section 10A-5A-10.02, the plan of conversion is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of conversion that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of conversion.
(Act 2014-144, p. 265, §1; Act 2019-94, §2; Act 2025-281, §5.)
(a) Subject to Section 10A-5A-10.09, a plan of conversion must be consented to by all the members of a converting limited liability company.
(b) Subject to Section 10A-5A-10.09 and any contractual rights, after a conversion is approved, and at any time before a filing is made under Section 10A-5A-10.03, a converting limited liability company may amend the plan or abandon the planned conversion:
(1) as provided in the plan; and
(2) except as prohibited by the plan, by the same consent as was required to approve the plan.
(Act 2014-144, p. 265, §1.)
(a) After a plan of conversion is approved:
(1) if the converting organization is an organization formed under, or its internal affairs are governed by, the laws of this state, the converting organization shall file a statement of conversion in accordance with subsection (c), which statement of conversion must be signed in accordance with Section 10A-5A-2.04(a) and which must include:
(A) the name, type of organization, and mailing address of the principal office of the converting organization, and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;
(B) the date of the filing of the certificate of formation of the converting organization, if any, and all prior amendments and the filing office or offices, if any, where such is filed;
(C) a statement that the converting organization has been converted into the converted organization;
(D) the name and type of organization of the converted organization and the jurisdiction of its governing statute;
(E) the street and mailing address of the principal office of the converted organization;
(F) the date the conversion is effective under the governing statute of the converted organization;
(G) a statement that the conversion was approved as required by this chapter;
(H) a statement that the conversion was approved as required by the governing statute of the converted organization; and
(I) a statement that a copy of the plan of conversion will be furnished by the converted organization, on request and without cost, to any owner of the converting organization; and
(J) if the converted organization is a foreign organization not authorized to conduct activities and affairs in this state, the street and mailing address of an office for the purposes of Section 10A-5A-10.04(b); and
(2) if the converted organization is a limited liability company, the converting organization shall deliver for filing a certificate of formation in accordance with subsection (d), which certificate of formation must include, in addition to the information required by Section 10A-5A-2.01(a):
(A) a statement that the limited liability company was converted from the converting organization;
(B) the name and type of organization of the converting organization, the jurisdiction of the converting organization’s governing statute, and the converting organization’s unique identifying number or other designation as assigned by the Secretary of State, if any; and
(C) a statement that the conversion was approved in a manner that complied with the converting organization’s governing statute.
(b) A conversion becomes effective:
(1) if the converted organization is a limited liability company, when the certificate of formation takes effect; and
(2) if the converted organization is not a limited liability company, as provided by the governing statute of the converted organization.
(c) If the converting organization is an organization formed under, or its internal affairs are governed by, the laws of this state, then the converting organization shall deliver for filing the statement of conversion required under subsection (a)(1) to the Secretary of State.
(d) If the converted organization is a limited liability company, the converting organization shall deliver for filing the certificate of formation required under subsection (a)(2) to the Secretary of State.
(e) If the converting organization is required to deliver for filing a statement of conversion and a certificate of formation to the Secretary of State, then the converting organization shall deliver for filing the statement of conversion and the certificate of formation to the Secretary of State simultaneously.
(f) After a conversion becomes effective, if the converted organization is a limited liability company then, except for certified copies of documents permitted to be delivered to the judge of probate for filing pursuant to subsection (h) all filing instruments required to be filed under this title regarding that converted organization shall be filed with the Secretary of State.
(g) If:
(1) the converting organization is a filing entity or a foreign filing entity registered to conduct activities and affairs in this state;
(2) the converted organization will be a filing entity or a foreign filing entity registered to conduct activities and affairs in this state;
(3) the name of the converting organization and the converted organization are to be the same, other than words, phrases, or abbreviations indicating the type of entity; and
(4) the name of the converted organization complies with Division A of Article 5 of Chapter 1 or Section 10A-1-7.07, as the case may be; then notwithstanding Division B of Article 5 of Chapter 1, no name reservation shall be required and the converted organization shall for all purpose of this title be entitled to utilize the name of the converting organization without any further action by the converting organization or the converted organization.
(h) A certified copy of any document required to be filed under this section may be filed in the real estate records in the office of the judge of probate in any county in which the converting organization owned real property, without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate shall, however, be entitled to collect a filing fee of five dollars ($5). Any such filing shall evidence chain of title, but lack of filing shall not affect the converted organization’s title to such real property.
(i) A statement of conversion is a filing instrument under Chapter 1.
(j) The filing fees for a statement of conversion shall be as set forth in Chapter 1.
(Act 2014-144, p. 265, §1; Act 2016-379, p. 934, §4; Act 2019-94, §2.)
(a) When a conversion takes effect:
(1) all property and contract rights owned by the converting organization, or series thereof, remains vested in the converted organization without transfer, reversion, or impairment and the title to any property vested by deed or otherwise in the converting organization shall not revert or be in any way impaired by reason of the conversion;
(2) all debts, obligations, or other liabilities of the converting organization, or series thereof, continue as debts, obligations, or other liabilities of the converted organization and neither the rights of creditors, nor the liens upon the property of the converting organization shall be impaired by the conversion;
(3) an action or proceeding pending by or against the converting organization, or series thereof, continues as if the conversion had not occurred and the name of the converted entity may, but need not, be substituted for the name of the converting entity in any pending action or proceeding;
(4) except as prohibited by law other than this chapter, all of the rights, privileges, immunities, powers, and purposes of the converting organization, or series thereof, remain vested in the converted organization;
(5) except as otherwise provided in the plan of conversion, the terms and conditions of the plan of conversion take effect;
(6) except as otherwise agreed, for all purposes of the laws of this state, the converting organization, and any series thereof, shall not be required to wind up its affairs or pay its liabilities and distribute its assets, and the conversion shall not be deemed to constitute a dissolution of the converting organization, or series thereof;
(7) for all purposes of the laws of this state, the rights, privileges, powers, interests in property, debts, liabilities, and duties of the converting organization, and all series thereof, shall be the rights, privileges, powers, interests in property, debts, liabilities, and duties of the converted organization, and shall not be deemed as a consequence of the conversion, to have been transferred to the converted organization;
(8) if the converted organization is a limited liability company, for all purposes of the laws of this state, the limited liability company shall be deemed to be the same organization as the converting organization, and the conversion shall constitute a continuation of the existence of the converting organization in the form of a limited liability company;
(9) if the converted organization is a limited liability company, the existence of the limited liability company shall be deemed to have commenced on the date the converting organization commenced its existence in the jurisdiction in which the converting organization was first created, formed, organized, incorporated, or otherwise came into being;
(10) the conversion shall not affect the choice of law applicable to matters arising prior to conversion; and
(11) If the Secretary of State has assigned a unique identifying number or other designation to the converting organization and (i) the converted organization is formed pursuant to, or its internal affairs are governed by, the laws of this state or (ii) the converted organization is, within 30 days after the effective date of the conversion, registered to transact business in this state, then that unique identifying number or other designation shall continue to be assigned to the converted organization.
(b) A converted organization that is a foreign entity consents to the jurisdiction of the courts of this state to enforce any debt, obligation, or other liability for which the converting limited liability company, or series thereof, is liable if, before the conversion, the converting limited liability company was subject to suit in this state on the debt, obligation, or other liability. If a converted organization that is a foreign entity fails to designate or maintain a registered agent, or the designated registered agent cannot with reasonable diligence be served, then service of process on that converted organization for the purposes of enforcing a debt, obligation, or other liability under this subsection may be made in the same manner and has the same consequences as provided in Section 10A-1-5.35.
(Act 2014-144, p. 265, §1; Act 2016-379, p. 934, §4; Act 2019-94, §2.)
(a) A limited liability company may merge with one or more other constituent organizations pursuant to this section, Sections 10A-5A-10.06 through 10A-5A-10.08, and a plan of merger, if:
(1) the governing statute of each of the other organizations authorizes the merger;
(2) the merger is not prohibited by the law of a jurisdiction that enacted any of those governing statutes; and
(3) each of the other organizations complies with its governing statute in effecting the merger.
(b) A plan of merger must be in writing and must include:
(1) the name, type of organization, and mailing address of the principal office of each constituent organization, the jurisdiction of the governing statute of each constituent organization, and the respective unique identifying number or other designation as assigned by the Secretary of State, if any, of each constituent organization;
(2) the name, type of organization, and mailing address of the principal office of the surviving organization, the unique identifying number or other designation as assigned by the Secretary of State, if any, of the surviving organization, the jurisdiction of the governing statute of the surviving organization, and, if the surviving organization is to be created pursuant to the merger, a statement to that effect;
(3) the terms and conditions of the merger, including the manner and basis for converting the interests in each constituent organization into any combination of money, interests in the surviving organization, and other consideration as allowed by subsection (c);
(4) if the surviving organization is to be created pursuant to the merger, the surviving organization’s organizational documents; and
(5) if the surviving organization is not to be created pursuant to the merger, any amendments to be made by the merger to the surviving organization’s organizational documents.
(c) In connection with a merger, rights or securities of or interests in a constituent organization may be exchanged for or converted into cash, property, or rights or securities of or interests in the surviving organization, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, or rights or securities of or interests in another organization or may be cancelled.
(d) In addition to the requirements of subsection (b), a plan of merger may:
(1) provide that (i) a constituent organization or any other party to the plan of merger that fails to perform its obligations under the plan of merger in accordance with the terms and conditions of the plan of merger, or that otherwise fails to comply with the terms and conditions of the plan of merger, in each case, required to be performed or complied with prior to the time the merger becomes effective, or that otherwise fails to consummate, or fails to cause the consummation of, the merger (whether prior to a specified date, upon satisfaction or, to the extent permitted by law, waiver of all conditions to consummation set forth in the plan of merger, or otherwise) shall be subject, in addition to any other remedies available at law or in equity, to the penalties or consequences as are set forth in the plan of merger (which penalties or consequences may include an obligation to pay to the other party or parties to the plan of merger an amount representing, or based on the loss of, any premium or other economic entitlement the owners of the other party would be entitled to receive pursuant to the terms of the plan of merger if the merger were consummated in accordance with the terms of the plan of merger) and (ii) if, pursuant to the terms of the plan of merger, a limited liability company is entitled to receive payment from another party to the plan of merger of any amount representing a penalty or consequence (as specified in clause (i) of this Section 10A-5A-10.02(d)(1)), the limited liability company shall be entitled to enforce the other party’s payment obligation and, upon receipt of any payment, shall be entitled to retain the amount of the payment so received;
(2) provide (i) for the appointment, at or after the time at which the plan of merger is adopted by the members of a constituent limited liability company in accordance with the requirements of Section 10A-5A-10.06, of one or more persons (which may include the surviving or resulting entity or any officer, manager, representative, or agent thereof) as representative of the members of a constituent limited liability company, including those whose transferable interest shall be cancelled, converted, or exchanged in the merger, and for the delegation to that person or persons of the sole and exclusive authority to take action on behalf of the members pursuant to the plan of merger, including taking such actions as the representative determines to enforce (including by entering into settlements with respect to) the rights of the members under the plan of merger, on the terms and subject to the conditions set forth in the plan of merger, (ii) that any appointment pursuant to clause (i) of this Section 10A-5A-10.02(d)(2) shall be irrevocable and binding on all members from and after the adoption of the plan of merger by the requisite vote of the members pursuant to Section 10A-5A-10.06, and (iii) that any provision adopted pursuant to this Section 10A-5A-10.02(d)(2) may not be amended after the merger has become effective or may be amended only with the consent or approval of persons specified in the plan of merger; and
(3) contain any other provision not prohibited by law.
(e) At the time of the approval of the plan of merger in accordance with Section 10A-5A-10.06, the plan of merger is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of merger that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of merger.
(Act 2014-144, p. 265, §1; Act 2019-94, §2; Act 2025-281, §5.)
(a) Subject to Section 10A-5A-10.09, a plan of merger must be consented to by all the members of a constituent limited liability company.
(b) Subject to Section 10A-5A-10.09 and any contractual rights, after a merger is approved, and at any time before a filing is made under Section 10A-5A-10.07, a constituent limited liability company may amend the plan or abandon the merger:
(1) as provided in the plan; and
(2) except as prohibited by the plan, with the same consent as was required to approve the plan.
(Act 2014-144, p. 265, §1.)
(a) After each constituent organization has approved the plan of merger, a statement of merger must be signed on behalf of:
(1) each constituent limited liability company, as provided in Section 10A-5A-2.04(a); and
(2) each other constituent organization, as provided by its governing statute.
(b) A statement of merger under this section must include:
(1) the name, type of organization, and mailing address of the principal office of each constituent organization, the jurisdiction of the governing statute of each constituent organization, and the respective unique identifying number or other designation as assigned by the Secretary of State, if any, of each constituent organization;
(2) the name, type of organization, and mailing address of the principal office of the surviving organization, the unique identifying number or other designation as assigned by the Secretary of State, if any, of the surviving organization, the jurisdiction of the governing statute of the surviving organization, and, if the surviving organization is created pursuant to the merger, a statement to that effect;
(3) the date the merger is effective under the governing statute of the surviving organization;
(4) if the surviving organization is to be created pursuant to the merger:
(A) if it will be a limited liability company, the limited liability company’s certificate of formation; or
(B) if it will be an organization other than a limited liability company, any organizational document that creates the organization that is required to be in a public writing;
(5) if the surviving organization exists before the merger, any amendments provided for in the plan of merger for the organizational document that created the organization that are required to be in a public writing;
(6) a statement as to each constituent organization that the merger was approved as required by the organization’s governing statute;
(7) a statement that a copy of the plan of merger will be furnished by the surviving organization, on request and without cost, to any owner of any constituent organization which is a party to the merger;
(8) if the surviving organization is a foreign organization not authorized to conduct activities and affairs in this state, the street and mailing address of an office for the purposes of Section 10A-5A-10.08(b); and
(9) any additional information required by the governing statute of any constituent organization.
(c) The statement of merger shall be delivered for filing to the Secretary of State.
(d) A merger becomes effective under this article:
(1) if the surviving organization is a limited liability company, upon the later of:
(A) the filing of the statement of merger with the Secretary of State; or
(B) as specified in the statement of merger; or
(2) if the surviving organization is not a limited liability company, as provided by the governing statute of the surviving organization.
(e) A certified copy of the statement of merger required to be filed under this section may be filed in the real estate records in the office of the judge of probate in any county in which any constituent organization owned real property, without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate, however, shall be entitled to collect the filing fee of five dollars ($5). Any such filing shall evidence chain of title, but lack of filing shall not affect the surviving organization’s title to such real property.
(f) A statement of merger is a filing instrument under Chapter 1.
(g) The filing fees for a statement of merger shall be as set forth in Chapter 1.
(Act 2014-144, p. 265, §1; Act 2016-379, p. 934, §4; Act 2019-94, §2; Act 2023-503, §5.)
(a) When a merger becomes effective:
(1) the surviving organization continues or, in the case of a surviving organization created pursuant to the merger, comes into existence;
(2) each constituent organization that merges into the surviving organization ceases to exist as a separate entity;
(3) except as provided in the plan of merger, all property owned by, and every contract right possessed by, each constituent organization, or series thereof, that ceases to exist vests in the surviving organization without transfer, reversion, or impairment and the title to any property and contract rights vested by deed or otherwise in the surviving organization shall not revert, be in any way impaired, or be deemed to be a transfer by reason of the merger;
(4) all debts, obligations, and other liabilities of each constituent organization, or series thereof, other than the surviving organization, are debts, obligations, and other liabilities of the surviving organization, and neither the rights of creditors, nor any liens upon the property of any constituent organization, shall be impaired by the merger;
(5) an action or proceeding pending by or against any constituent organization, or series thereof, continues as if the merger had not occurred and the name of the surviving organization may be, but need not be, substituted in any pending proceeding for the name of any constituent organization whose separate existence ceased in the merger;
(6) except as prohibited by law other than this chapter, or as provided in the plan of merger, all of the rights, privileges, franchises, immunities, powers, and purposes of each constituent organization, or series thereof, other than the surviving organization, vest in the surviving organization;
(7) except as otherwise provided in the plan of merger, the terms and conditions of the plan of merger take effect;
(8) except as otherwise agreed, if a constituent limited liability company ceases to exist, the merger does not dissolve the limited liability company and does not dissolve a series thereof;
(9) if the surviving organization is created pursuant to the merger:
(A) if it is a limited liability company, the certificate of formation becomes effective; or
(B) if it is an organization other than a limited liability company, the organizational documents that create the organization become effective; and
(10) if the surviving organization existed before the merger, any amendments provided for in the statement of merger for the organizational documents of that organization become effective;
(11) the transferable interests of each limited liability company that is a constituent organization to the merger, and the ownership interests of each organization that is not a limited liability company, but is a constituent organization to the merger, that are to be converted in accordance with the terms of the merger into transferable interests, ownership interests, other securities, obligations, rights to acquire transferable interests, ownership interests, or other securities, cash, other property, or any combination of the foregoing, are converted, and the former holder of such transferable interests or ownership interests is entitled only to the rights provided to that former holder by those terms or the statute governing that former holder’s constituent organization; and
(12) if the surviving organization exists before the merger:
(i) except as provided in the plan of merger, all property and contract rights of the surviving organization remain its property and contract rights without transfer, reversion, or impairment;
(ii) the surviving organization remains subject to all its debts, obligations, and other liabilities; and
(iii) except as provided by law other than this chapter, or the plan of merger, the surviving organization continues to hold all of its rights, privileges, franchises, immunities, powers, and purposes.
(b) A surviving organization that is a foreign entity consents to the jurisdiction of this state to enforce any debt, obligation, or other liability owed by a constituent organization, if before the merger the constituent organization was subject to suit in this state on the debt, obligation, or other liability. If a surviving organization that is a foreign entity fails to designate or maintain a registered agent, or the designated registered agent cannot with reasonable diligence be served, then the service of process on that surviving organization for the purposes of enforcing a debt, obligation, or other liability under this subsection may be made in the same manner and has the same consequences as provided in Section 10A-1-5.35.
(Act 2014-144, p. 265, §1; Act 2016-379, p. 934, §4; Act 2018-125, §6; Act 2019-94, §2.)
(a) If a member of a converting or constituent limited liability company will have personal liability with respect to a converted or surviving organization, approval and amendment of a plan of conversion or plan of merger are ineffective without that member’s consent to the plan.
(b) A member does not give the consent required by subsection (a) merely by consenting to a provision of the limited liability company agreement that permits the limited liability company agreement to be amended with the consent of fewer than all the members.
(Act 2014-144, p. 265, §1.)
This article is not exclusive. This article does not preclude an entity from being converted or merged under law other than this chapter.
(Act 2014-144, p. 265, §1.)
(a) If a limited liability company complies with Section 10A-5A-11.02, a limited liability company agreement may establish or provide for the establishment of one or more designated series of assets that:
(1) has separate rights, powers, or duties with respect to specified property or obligations of the limited liability company or profits and losses associated with specified property or obligations; or
(2) has a separate purpose or investment objective.
(b) A series established in accordance with subsection (a) may carry on any activity, whether or not for profit.
(c) After a person is admitted as a member of a limited liability company in accordance with Section 10A-5A-4.01, a member is associated with a series of the limited liability company:
(1) as provided in the limited liability agreement;
(2) as the result of a transaction effective under Article 10; or
(3) with the consent of all members associated with that series.
(Act 2014-144, p. 265, §1.)
(a) Subject to subsection (b):
(1) the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to a series shall be enforceable against the assets of that series only, and shall not be enforceable against the assets of the limited liability company generally or any other series thereof; and
(2) none of the debts, liabilities, obligations, and expenses incurred, contracted for, or otherwise existing with respect to the limited liability company generally or any other series thereof shall be enforceable against the assets of a series.
(b) Subsection (a) applies only if:
(1) the records maintained for that series account for the assets of that series separately from the other assets of the limited liability company or any other series;
(2) the limited liability company agreement contains a statement to the effect of the limitations provided in subsection (a); and
(3) the limited liability company’s certificate of formation contains a statement that the limited liability company may have one or more series of assets subject to the limitations provided in subsection (a).
(Act 2014-144, p. 265, §1.)
(a) Assets of a series may be held directly or indirectly, including being held in the name of the series or in the name of the limited liability company.
(b) If the records of a series are maintained in a manner so that the assets of the series can be reasonably identified by specific listing, category, type, quantity, or computational or allocational formula or procedure, including a percentage or share of any assets, or by any other method in which the identity of the assets can be objectively determined, the records are considered to satisfy the requirements of Section 10A-5A-11.02(b)(1).
(Act 2014-144, p. 265, §1.)
The statement of limitation on liabilities of a series required by Section 10A-5A-11.02(b)(3) is sufficient regardless of whether:
(a) the limited liability company has established any series under this chapter when the statement of limitations is contained in the certificate of formation; and
(b) the statement of limitations makes reference to a specific series of the limited liability company.
(Act 2014-144, p. 265, §1.)
(a) A person has the power to dissociate as a member associated with a series.
(b) A person’s dissociation from a series is wrongful only if:
(1) it is in breach of an express provision of the limited liability company agreement; or
(2) the person is expelled as a member associated with the series by judicial determination under Section 10A-5A-11.06(f); or
(3) the person is dissociated as a member associated with a series by becoming a debtor in bankruptcy or making a general assignment for the benefit of creditors.
(c) A person that wrongfully dissociates as a member associated with a series is liable to the series and, subject to Section 10A-5A-9.01, to the other members associated with that series for damages caused by the dissociation. The liability is in addition to any other debt, obligation, or liability of the member associated with a series to the series or the other members associated with that series.
(Act 2014-144, p. 265, §1.)
A person is dissociated as a member associated with a series when any of the following occurs:
(a) the series has notice of the person’s express will to dissociate from the series, except if the person specifies a dissociation date later than the date the series had notice, then the person is dissociated from the series on that later date;
(b) an event stated in the limited liability company agreement as causing the person’s dissociation from the series occurs;
(c) the person is dissociated as a member of the limited liability company pursuant to Section 10A-5A-6.02;
(d) the person is expelled as a member associated with that series pursuant to the limited liability company agreement;
(e) the person is expelled as a member associated with the series by the unanimous consent of the other members associated with that series if:
(1) it is unlawful to carry on the series’ activities and affairs with the person as a member associated with that series; or
(2) there has been a transfer of all of the person’s transferable interest other than a transfer for security purposes; or
(3) the person is an organization and, within 90 days after the series notifies the person that it will be expelled as a member associated with that series because the person has filed a statement of dissolution or the equivalent, or its right to conduct activities and affairs has been suspended by its jurisdiction of formation, the statement of dissolution or the equivalent has not been revoked or its right to conduct activities and affairs has not been reinstated; or
(4) the person is an organization and, within 90 days after the series notifies the person that it will be expelled as a member associated with that series because the person has been dissolved and its activities and affairs are being wound up, the organization has not been reinstated or the dissolution and winding up have not been revoked or cancelled;
(f) on application by the series, the person is expelled as a member associated with that series by judicial order because the person:
(1) has engaged, or is engaging, in wrongful conduct that has adversely and materially affected, or will adversely and materially affect, that series’ activities and affairs;
(2) has willfully or persistently committed, or is willfully and persistently committing, a material breach of the limited liability company agreement or the person’s duty or obligation under this chapter or other applicable law; or
(3) has engaged, or is engaging, in conduct relating to that series’ activities and affairs that makes it not reasonably practicable to carry on the activities and affairs with the person as a member associated with that series;
(g) in the case of a person who is an individual, the person dies, there is appointed a guardian or general conservator for the person or there is a judicial determination that the person has otherwise become incapable of performing the person’s duties as a member associated with a series under this chapter or the limited liability company agreement;
(h) the person becomes a debtor in bankruptcy, executes an assignment for the benefit of creditors, or seeks, consents, or acquiesces to the appointment of a trustee, receiver, or liquidator of the person or of all or substantially all of the person’s property but this subsection shall not apply to a person who is the sole remaining member associated with a series;
(i) in the case of a person that is a trust or is acting as a member by virtue of being a trustee of a trust, the trust’s entire transferable interest is distributed, but not solely by reason of the substitution of a successor trustee;
(j) in the case of a person that is an estate or is acting as a member by virtue of being a personal representative of an estate, the estate’s entire transferable interest is distributed, but not solely by reason of the substitution of a successor personal representative;
(k) in the case of a member associated with a series that is not an individual, the legal existence of the person otherwise terminates;
(l) the transfer of a member’s entire remaining transferable interest but not until the later of (1) the transferee’s becoming a member associated with the series or (2) the time the transfer is completed.
(Act 2014-144, p. 265, §1.)
(a) A person who has dissociated as a member associated with a series shall have no right to participate in the direction and oversight of the activities and affairs of that series and is entitled only to receive the distributions to which that member would have been entitled if the member had not dissociated from that series.
(b) A person’s dissociation as a member associated with a series does not of itself discharge the person from any debt, obligation, or liability to that series, the limited liability company, or the other members that the person incurred while a member associated with that series.
(c) A member’s dissociation from a series does not, in itself, cause the member to dissociate from any other series or require the winding up of the series.
(d) A member’s dissociation from a series does not, in itself, cause the member to dissociate from the limited liability company.
(Act 2014-144, p. 265, §1.)
A series may be dissolved and its activities and affairs may be wound up without causing the dissolution of the limited liability company. The dissolution and winding up of a series does not abate, suspend, or otherwise affect the limitation on liabilities of the series provided by Section 10A-5A-11.02.
(Act 2014-144, p. 265, §1.)
A series is dissolved and its activities and affairs shall be wound up upon the first to occur of the following:
(a) the dissolution of the limited liability company under Section 10A-5A-7.01;
(b) an event or circumstance that the limited liability company agreement states causes dissolution of the series;
(c) the consent of all of the members associated with the series;
(d) the passage of 90 days after the occurrence of the dissociation of the last remaining member associated with the series; or
(e) on application by a member associated with the series, an order dissolving the series on the grounds that it is not reasonably practicable to carry on the series’ activities and affairs in conformity with the limited liability company agreement which order is entered by the designated court, and if none, by the circuit court for the county in which the limited liability company’s principal office within this state is located, and if the limited liability company does not have a principal office within this state then by the circuit court for the county in which the limited liability company’s most recent registered office is located.
(Act 2014-144, p. 265, §1; Act 2020-73, §10.)
(a) A dissolved series continues its existence as a series but may not carry on any activities and affairs except as is appropriate to wind up and liquidate its activities and affairs, including:
(1) collecting the assets of the series;
(2) disposing of the properties of the series that will not be distributed in kind to persons owning transferable interests;
(3) discharging or making provisions for discharging the liabilities of the series;
(4) distributing the remaining property of the series in accordance with Section 10A-5A-11.14; and
(5) doing every other act necessary to wind up and liquidate the series’ activities and affairs.
(b) In winding up a series’ activities and affairs, a series may:
(1) preserve the series’ activities and affairs and property as a going concern for a reasonable time;
(2) prosecute, defend, or settle actions or proceedings whether civil, criminal, or administrative;
(3) transfer the series’ property; and
(4) resolve disputes by mediation or arbitration.
(c) The dissolution of a series does not:
(1) transfer title to the series’ property;
(2) prevent the commencement of a proceeding by or against the series in the series’ name;
(3) terminate, abate, or suspend a proceeding pending by or against the series on the effective date of dissolution; or
(4) abate, suspend, or otherwise alter the application of Section 10A-5A-3.01.
(Act 2014-144, p. 265, §1; Act 2021-299, §5.)
(a) The person or persons designated in the limited liability company agreement to wind up the activities and affairs of the dissolved series shall wind up the activities and affairs of the dissolved series in accordance with Section 10A-5A-11.10. If no person or persons are designated in the limited liability company agreement to wind up the activities and affairs of the dissolved series, then the remaining members associated with the dissolved series shall wind up the activities and affairs of the dissolved series in accordance with Section 10A-5A-11.10. If no person or persons are designated in the limited liability company agreement to wind up the activities and affairs of the dissolved series and there are no remaining members associated with the dissolved series, then all of the holders of the transferable interests associated with the series, or their designee, shall wind up the activities and affairs of the dissolved series in accordance with Section 10A-5A-11.10.
(b) The designated court, and if none, the circuit court for the county in which the limited liability company’s principal office within this state is located, and if the limited liability company does not have a principal office within this state then the circuit court for the county in which the limited liability company’s most recent registered office is located may order judicial supervision of the winding up of a dissolved series, including the appointment of a person to wind up the series’ activities and affairs:
(1) on application of a member associated with the series, if the applicant establishes good cause;
(2) on the application of a transferee associated with a series, if:
(A) there are no members associated with the series; and
(B) within a reasonable time following the dissolution a person has not been appointed pursuant to subsection (a); or
(3) in connection with a proceeding under Section 10A-5A-11.09(e).
(Act 2014-144, p. 265, §1; Act 2020-73, §10.)
(a) A dissolved series may dispose of any known claims against it by following the procedures described in subsection (b), at any time after the effective date of the dissolution of the series.
(b) A dissolved series may give notice of the dissolution in a writing to the holder of any known claim. The notice must:
(1) identify the limited liability company and the dissolved series;
(2) describe the information required to be included in a claim;
(3) provide a mailing address to which the claim is to be sent;
(4) state the deadline, which may not be fewer than 120 days from the effective date of the notice, by which the dissolved series must receive the claim; and
(5) state that if not sooner barred, the claim will be barred if not received by the deadline.
(c) Unless sooner barred by any other statute limiting actions, a claim against a dissolved series is barred:
(1) If a claimant who was given notice under subsection (b) does not deliver the claim to the dissolved series by the deadline; or
(2) If a claimant whose claim was rejected by the dissolved series does not commence a proceeding to enforce the claim within 90 days from the effective date of the rejected notice.
(d) For purposes of this section, known claim or claim includes unliquidated claims, but does not include a contingent liability that has not matured so that there is no immediate right to bring suit or a claim based on an event occurring after the effective date of dissolution.
(e) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(Act 2014-144, p. 265, §1; Act 2021-299, §5.)
(a) A dissolved series may publish notice of its dissolution and request that persons with claims against the dissolved series present them in accordance with the notice.
(b) The notice authorized by subsection (a) must:
(1) be published at least one time in a newspaper of general circulation in the county in which the limited liability company’s principal office is located or, if it has none in this state, in the county in which the limited liability company’s most recent registered office is located;
(2) describe the information that must be included in a claim and provide a mailing address to which the claim is to be sent; and
(3) state that if not sooner barred, a claim against the dissolved series will be barred unless a proceeding to enforce the claim is commenced within two years after the publication of the notice.
(c) If a dissolved series publishes a newspaper notice in accordance with subsection (b), unless sooner barred by any other statute limiting actions, the claim of each of the following claimants is barred unless the claimant commences a proceeding to enforce the claim against the dissolved series within two years after the publication date of the newspaper notice:
(1) a claimant who was not given notice under Section 10A-5A-11.12(b);
(2) a claimant whose claim was timely sent to the dissolved series but not acted on by the dissolved series; and
(3) a claimant whose claim is contingent at the effective date of the dissolution of the series, or is based on an event occurring after the effective date of the dissolution of the series.
(d) A claim that is not barred under this section, any other statute limiting actions, or Section 10A-5A-11.12 may be enforced:
(1) against a dissolved series, to the extent of its undistributed assets associated with the series; and
(2) except as provided in subsection (h), if the assets of a dissolved series have been distributed after dissolution, against the person or persons owning the transferable interests associated with the series to the extent of that person’s proportionate share of the claim or of the assets of the series distributed to that person after dissolution, whichever is less, but a person’s total liability for all claims under this subsection may not exceed the total amount of assets of the series distributed to that person after dissolution of the series.
(e) A dissolved series that published a notice under this section may file an application with the circuit court for the county in which the limited liability company’s principal office is located in this state and if the limited liability company does not have a principal office within this state then the circuit court for the county in which the limited liability company’s most recent registered office is located, for a determination of the amount and form of security to be provided for payment of claims that are contingent or have not been made known to the dissolved series or that are based on an event occurring after the effective date of the dissolution of the series but that, based on the facts known to the dissolved series, are reasonably estimated to arise after the effective date of the dissolution of the series. Provision need not be made for any claim that is or is reasonably anticipated to be barred under subsection (c).
(f) Within 10 days after the filing of the application provided for in subsection (e), notice of the proceeding shall be given by the dissolved series to each potential claimant as described in subsection (e).
(g) The circuit court under subsection (e) may appoint a guardian ad litem to represent all claimants whose identities are unknown in any proceeding brought under this section. The reasonable fees and expenses of the guardian, including all reasonable expert witness fees, shall be paid by the dissolved series.
(h) Provision by the dissolved series for security in the amount and the form ordered by the circuit court under subsection (e) shall satisfy the dissolved series’ obligation with respect to claims that are contingent, have not been made known to the dissolved series, or are based on an event occurring after the effective date of the dissolution of the series, and those claims may not be enforced against a person owning a transferable interest to whom assets have been distributed by the dissolved series after the effective date of the dissolution of the series.
(i) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(j) If a claim has been satisfied, disposed of, or barred under Section 10A-5A-11.12, this section, or other law, the person or persons designated to wind up the affairs of a limited liability company, and the owners of the transferable interests receiving assets from the limited liability company, shall not be liable for that claim.
(Act 2014-144, p. 265, §1; Act 2020-73, §10; Act 2021-299, §5.)
Upon the winding up of a series, the assets of the series shall be applied as follows:
(a) Payment, or adequate provision for payment, shall be made to creditors of the series, including, to the extent permitted by law, members who are associated with the series and who are also creditors of the series, in satisfaction of liabilities of the series.
(b) After a series complies with subsection (a), any surplus must be distributed:
(1) first, to each person owning a transferable interest associated with that series that reflects contributions made on account of that transferable interest and not previously returned, an amount equal to the value of the unreturned contributions; and
(2) then to each person owning a transferable interest associated with that series in the proportions in which the owners of transferable interests associated with that series share in distributions prior to the dissolution of the series.
(c) If the series does not have sufficient surplus to comply with subsection (b)(1), any surplus must be distributed among the owners of transferable interests associated with that series in proportion to the value of their respective unreturned contributions.
(Act 2014-144, p. 265, §1; Act 2021-299, §5.)
A series that has been dissolved may be reinstated upon compliance with the following conditions:
(a) the consent shall have been obtained from the members or other persons associated with the series entitled to consent at the time that is:
(1) required for reinstatement of the series under the limited liability company agreement; or
(2) if the limited liability company agreement does not state the consent required for reinstatement, sufficient for dissolution of the series under the limited liability company agreement; or
(3) if the limited liability company agreement neither states the consent required for reinstatement nor for dissolution, sufficient for dissolution of the series under this chapter;
(b) in the case of a written objection to reinstatement having been delivered to the series before or at the time of the consent required by subsection (a) by the members or other persons having authority under the limited liability company agreement to bring about or prevent dissolution of the series, those members or persons withdrawing that written objection effective at the time of the consent required by subsection (a); and
(c) In the case of a series dissolved in a judicial proceeding initiated by one or more of the members associated with the series, the consent of each of those members shall have been obtained and shall be included in the consent required by subsection (a)(1).
(Act 2014-144, p. 265, §1; Act 2021-299, §5.)
(a) Subject to subsection (b), upon reinstatement, a series shall be deemed for all purposes to have continued its activities and affairs as if dissolution had never occurred; each right inuring to, and each debt, obligation, and liability incurred by, the series after the dissolution shall be determined as if the dissolution had never occurred.
(b) The rights of persons acting in reliance on the dissolution of the series before those persons had notice of the reinstatement shall not be adversely affected by the reinstatement.
(Act 2014-144, p. 265, §1.)
(a) Before January 1, 2017, this chapter governs only:
(1) a limited liability company formed on or after January 1, 2015; and
(2) except as otherwise provided in subsection (c), a limited liability company formed before January 1, 2015, which elects, in the manner provided in the limited liability company’s operating agreement or as provided for by law for amending or restating the limited liability company’s operating agreement, to be subject to this chapter.
(b) Except as otherwise provided in subsection (c), on and after January 1, 2017, this chapter governs all limited liability companies.
(c) For purposes of applying this chapter to a limited liability company formed before January 1, 2015:
(1) the limited liability company’s formation document, whether articles of organization or certificate of formation, is deemed to be the limited liability company’s certificate of formation;
(2) the limited liability company’s operating agreement is deemed to be the limited liability company’s limited liability company agreement;
(3) provisions in the limited liability company’s formation documents, whether articles of organization or certificate of formation, shall operate as if those provisions were in the limited liability company’s limited liability company agreement;
(4) if the limited liability company’s formation document, whether articles of organization or certificate of formation, is amended or restated on or after January 1, 2015, and the limited liability company’s formation document, whether articles of organization or certificate of formation, is in conflict with the limited liability company’s limited liability agreement, then Section 10A-5A-1.10(d) shall govern; and
(5) any amendment or restatement of the limited liability company’s formation document, whether articles of organization or certificate of formation, on or after January 1, 2015, shall conform with this chapter.
(Act 2014-144, p. 265, §1; Act 2015-165, §1.)
This chapter modifies, limits, and supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but does not modify, limit, or supersede Section 101(c) of that act, 15 U.S.C. Section 7001(c), or authorize electronic delivery of any of the notices described in Section 103(b) of that act, 15 U.S.C. Section 7003(b).
(Act 2014-144, p. 265, §1.)
A limited liability company formed and existing under this chapter may conduct its activities and affairs, carry on its operations, and have and exercise the powers granted by this chapter in any state, foreign country, or other jurisdiction.
(Act 2014-144, p. 265, §1.)
(a) Except as provided in subsection (b), the repeal of a statute by this chapter does not affect:
(1) the operation of the statute or any action taken under it before its repeal;
(2) any ratification, right, remedy, privilege, obligation, or liability acquired, accrued, or incurred under the statute before its repeal;
(3) any violation of the statute, or any penalty, forfeiture, or punishment incurred because of the violation, before its repeal; or
(4) any proceeding, reorganization, or dissolution commenced under the statute before its repeal, and the proceeding, reorganization, or dissolution may be completed in accordance with the statute as if it had not been repealed.
(b) If a penalty or punishment imposed for violation of a statute repealed by this chapter is reduced by this chapter, the penalty or punishment if not already imposed shall be imposed in accordance with this chapter.
(Act 2014-144, p. 265, §1.)
All provisions of this chapter may be altered from time to time or repealed and all rights of members and agents are subject to this reservation. Unless expressly stated to the contrary in this chapter, all amendments of this chapter shall apply to limited liability companies and members and agents whether or not existing as such at the time of the enactment of any such amendment.
(Act 2014-144, p. 265, §1.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1102; amended and renumbered by Act 2009-513, p. 967, §248.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-101; amended and renumbered by Act 2009-513, p. 967, §248.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-102; amended and renumbered by Act 2009-513, p. 967, §248.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-103; amended and renumbered by Act 2009-513, p. 967, §248.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-104; amended and renumbered by Act 2009-513, p. 967, §248.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-105; amended and renumbered by Act 2009-513, p. 967, §248.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-106; amended and renumbered by Act 2009-513, p. 967, §248.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-107; amended and renumbered by Act 2009-513, p. 967, §248.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-201; amended and renumbered by Act 2009-513, p. 967, §250.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-202; amended and renumbered by Act 2009-513, p. 967, §250.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-203; amended and renumbered by Act 2009-513, p. 967, §250.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-204; amended and renumbered by Act 2009-513, p. 967, §250.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-301; amended and renumbered by Act 2009-513, p. 967, §252.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-302; amended and renumbered by Act 2009-513, p. 967, §252.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-303; amended and renumbered by Act 2009-513, p. 967, §252.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-304; amended and renumbered by Act 2009-513, p. 967, §252.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-305; amended and renumbered by Act 2009-513, p. 967, §252.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-306; amended and renumbered by Act 2009-513, p. 967, §252.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-307; amended and renumbered by Act 2009-513, p. 967, §252.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-308; amended and renumbered by Act 2009-513, p. 967, §252.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-401; amended and renumbered by Act 2009-513, p. 967, §254.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-402; amended and renumbered by Act 2009-513, p. 967, §254.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-403; amended and renumbered by Act 2009-513, p. 967, §254.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-404; amended and renumbered by Act 2009-513, p. 967, §254.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-405; amended and renumbered by Act 2009-513, p. 967, §254.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-406; amended and renumbered by Act 2009-513, p. 967, §254.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-501; amended and renumbered by Act 2009-513, p. 967, §256.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-502; amended and renumbered by Act 2009-513, p. 967, §256.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-503; amended and renumbered by Act 2009-513, p. 967, §256.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-504; amended and renumbered by Act 2009-513, p. 967, §256.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-601; amended and renumbered by Act 2009-513, p. 967, §258.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-602; amended and renumbered by Act 2009-513, p. 967, §258.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-603; amended and renumbered by Act 2009-513, p. 967, §258.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-701; amended and renumbered by Act 2009-513, p. 967, §260.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-702; amended and renumbered by Act 2009-513, p. 967, §260.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-703; amended and renumbered by Act 2009-513, p. 967, §260.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-704; amended and renumbered by Act 2009-513, p. 967, §260.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-705; amended and renumbered by Act 2009-513, p. 967, §260.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-801; amended and renumbered by Act 2009-513, p. 967, §262.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-802; amended and renumbered by Act 2009-513, p. 967, §262.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-803; amended and renumbered by Act 2009-513, p. 967, §262.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-804; amended and renumbered by Act 2009-513, p. 967, §262.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-805; amended and renumbered by Act 2009-513, p. 967, §262.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-806; amended and renumbered by Act 2009-513, p. 967, §262.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-807; amended and renumbered by Act 2009-513, p. 967, §262.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1001; amended and renumbered by Act 2009-513, p. 967, §266.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Reserved.
(Act 2009-513, §267.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
Reserved.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1003; amended and renumbered by Act 2009-513, §268.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1004; amended and renumbered by Act 2009-513, p. 967, §268.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1005; amended and renumbered by Act 2009-513, p. 967, §268.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1006; amended and renumbered by Act 2009-513, p. 967, §268.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1007; amended and renumbered by Act 2009-513, p. 967, §268.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1008; amended and renumbered by Act 2009-513, p. 967, §268.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1009; amended and renumbered by Act 2009-513, p. 967, §268.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1010; amended and renumbered by Act 2009-513, p. 967, §268.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1101; amended and renumbered by Act 2009-513, p. 967, §270.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1107; amended and renumbered by Act 2009-513, p. 967, §272.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1108; amended and renumbered by Act 2009-513, p. 967, §272.)
[Repealed]
REPEALED IN THE 2018 REGULAR SESSION BY ACT 2018-125 EFFECTIVE JANUARY 1, 2019. THIS IS NOT IN THE CURRENT CODE SUPPLEMENT.
(Acts 1996, No. 96-528, p. 685, §1; §10-8A-1109; amended and renumbered by Act 2009-513, p. 967, §272.)
This chapter and the provisions of Chapter 1 to the extent applicable to partnerships, shall be known and may be cited as the Alabama Partnership Law.
(Act 2018-125, §7.)
As used in this chapter, unless the context otherwise requires, the following terms mean:
(1) BUSINESS includes every trade, occupation, and profession for profit.
(2) DISQUALIFIED PERSON means any person who is not a qualified person.
(3) DISTRIBUTION except as otherwise provided in Section 10A-8A-4.09(f), means a transfer of money or other property from a partnership to another person on account of a transferable interest.
(4) FOREIGN LIMITED LIABILITY PARTNERSHIP means a foreign partnership whose partners have limited liability for the debts, obligations, or other liabilities of the foreign partnership under a provision similar to Section 10A-8A-3.06(c).
(5) FOREIGN PARTNERSHIP means a partnership governed by the laws of a jurisdiction other than this state which would be a partnership if governed by the laws of this state. The term includes a foreign limited liability partnership.
(6) LIMITED LIABILITY PARTNERSHIP, except in the phrase “foreign limited liability partnership”, means a partnership that has filed a statement of limited liability partnership under Section 10A-8A-10.01, and does not have a similar statement in effect in any other jurisdiction.
(7) NOT FOR PROFIT ACTIVITY includes every undertaking not for profit.
(8) PARTNER means a person that:
(A) has become a partner in a partnership under Section 10A-8A-4.02 or was a partner in a partnership when the partnership became subject to this chapter; and
(B) has not dissociated as a partner under Section 10A-8A-6.01.
(9) PARTNERSHIP means an entity that is formed under this chapter or that is governed by this chapter. The term includes, for all purposes of the laws of this state, a limited liability partnership.
(10) PARTNERSHIP AGREEMENT means any agreement (whether referred to as a partnership agreement or otherwise), written, oral or implied, of the partners as to the business or not for profit activity of a partnership. The partnership agreement includes any amendments to the partnership agreement.
(11) PARTNERSHIP AT WILL means a partnership in which the partners have not agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking.
(12) PERSON DISSOCIATED AS A PARTNER means a person dissociated as a partner of a partnership.
(13) QUALIFIED PERSON, with respect to a partnership rendering professional services in this state, means a person authorized by this state or a regulatory authority of this state to own a transferable interest in that partnership.
(14) REQUIRED INFORMATION means the information that a partnership is required to maintain under Section 10A-8A-1.11.
(15) STATEMENT means a statement of partnership under Section 10A-8A-2.02, a statement of not for profit partnership under Section 10A-8A-2.02, a statement of authority under Section 10A-8A-3.03, a statement of denial under Section 10A-8A-3.04, a statement of dissociation under Section 10A-8A-7.04, a statement of dissolution under Section 10A-8A-8.02 or under Section 10A-8A-8.03, a certificate of reinstatement under Section 10A-8A-8.11, a statement of limited liability partnership under Section 10A-8A-10.01, a statement of cancellation under Section 10A-8A-10.01, or any other document required or permitted to be delivered to the Secretary of State for filing under this chapter, or an amendment or cancellation of any of the foregoing.
(16) TRANSFER means an assignment, conveyance, deed, bill of sale, lease, mortgage, security interest, encumbrance, gift, or transfer by operation of law.
(17) TRANSFERABLE INTEREST means a partner’s right to receive distributions from a partnership.
(18) TRANSFEREE means a person to which all or part of a transferable interest has been transferred, whether or not the transferor is a partner.
(Act 2018-125, §7; Act 2019-304, §1; Act 2021-299, §5.)
(a) A person knows a fact when the person:
(1) has actual knowledge of it; or
(2) is deemed to know it under law other than this chapter.
(b) A person has notice of a fact when the person:
(1) knows of it;
(2) receives notice of it;
(3) has reason to know the fact from all of the facts known to the person at the time in question; or
(4) is deemed to have notice of the fact under subsection (d).
(c) A person notifies or gives notice to another person by taking steps reasonably required to inform the other person in ordinary course, whether or not the other person knows the fact.
(d) A person is deemed to have notice of a partnership’s:
(1) statement of partnership, 90 days after a statement of partnership under Section 10A-8A-2.02 becomes effective;
(2) statement of not for profit partnership, 90 days after a statement of not for profit partnership under Section 10A-8A-2.02 becomes effective;
(3) statement of authority, with respect to:
(i) authority not involving property and
(ii) property other than real property, 90 days after a statement of authority under Section 10A-8A-3.03 becomes effective; and with respect to real property in accordance with Section 10A-8A-3.03(g);
(4) statement of denial, with respect to property other than real property, 90 days after a statement of denial under Section 10A-8A-3.04 becomes effective;
(5) dissociation, 90 days after a statement of dissociation under Section 10A-9A-7.04 becomes effective;
(6) dissolution, 90 days after a statement of dissolution under Section 10A-9A-8.02 or Section 10A-9A-8.03 becomes effective;
(7) reinstatement, 90 days after a certificate of reinstatement under Section 10A-9A-8.11 becomes effective;
(8) merger or conversion under Article 9 or under Article 8 of Chapter 1, 90 days after the statement of merger or conversion becomes effective;
(9) statement of limited liability partnership, 90 days after a statement of limited liability partnership under Section 10A-8A-10.01 becomes effective; or
(10) statement of cancellation, 90 days after a statement of cancellation under Section 10A-8A-10.01 becomes effective.
(e) A partner’s knowledge, notice, or receipt of notice of a fact relating to the partnership is effective immediately as knowledge of, notice to, or receipt of notice by the partnership, except in the case of a fraud on the partnership committed by or with the consent of that partner.
(Act 2018-125, §7.)
(a) A partnership is a separate legal entity. A partnership’s status for tax purposes shall not affect its status as a separate legal entity formed under this chapter. A partnership is the same entity regardless of whether the partnership has a statement of limited liability partnership under Section 10A-8A-10.01 stating that the partnership is a limited liability partnership. A partner has no interest in any specific property of a partnership.
(b) A partnership may carry on any lawful business and may carry on any lawful not for profit activity if it complies with Section 10A-8A-2.02(b).
(Act 2018-125, §7.)
(a) A partnership shall possess and may exercise all the powers and privileges granted and enumerated by Chapter 1 or by any other law or by its partnership agreement, together with any powers incidental thereto, including those powers and privileges necessary or convenient to the conduct, promotion, or attainment of the business or not for profit activity of the partnership and including the power to sue, be sued, and defend in its own name and to maintain an action against a partner for harm caused to the partnership by a breach of the partnership agreement or violation of a duty to the partnership.
(b) A partnership may indemnify and hold harmless a partner or other person, pay in advance or reimburse expenses incurred by a partner or other person, and purchase and maintain insurance on behalf of a partner or other person.
(Act 2018-125, §7.)
(a) Except as otherwise provided in subsections (b), (c), and (d) of this section, the law of the jurisdiction in which the partnership has its principal office governs the partnership agreement and the relations among the partners and between the partners and the partnership.
(b) The law of this state governs the (i) internal affairs of a limited liability partnership, including the relations among the partners and between the partners and the partnership, (ii) the liability of a partner as a partner for the debts, obligations, or other liabilities of a limited liability partnership, and (iii) the authority of the partners of a limited liability partnership.
(c) The law of the jurisdiction in which a foreign limited liability partnership has filed its statement of limited liability partnership or similar writing governs the (i) internal affairs of that foreign limited liability partnership, including the relations among the partners and between the partners and the partnership, (ii) the liability of a partner as a partner for the debts, obligations, or other liabilities of a foreign limited liability partnership, and (iii) the authority of the partners of a foreign limited liability partnership.
(d) If (i) a partnership agreement provides for the application of the laws of this state, and (ii) the partnership delivers to the Secretary of State for filing a statement of partnership in accordance with Section 10A-8A-2.02(a), a statement of not for profit partnership in accordance with Section 10A-8A-2.02(b), or a statement of limited liability partnership in accordance with Section 10A-8A-10.01, then the partnership agreement shall be governed by and construed under the laws of this state.
(Act 2018-125, §7.)
(a) It is the policy of this chapter and this state to give maximum effect to the principles of freedom of contract and to the enforceability of partnership agreements.
(b) Unless displaced by particular provisions of this chapter, the principles of law and equity supplement this chapter.
(c) If an obligation to pay interest arises under this chapter and the rate is not specified, the rate is the applicable federal rate as determined from time to time by the United States Treasury pursuant to 26 U.S.C. § 1274(d) or any successor law.
(d) The rule that statutes in derogation of the common law are to be strictly construed shall have no application to this chapter.
(e) The use of any gender shall be applicable to all genders. The captions contained in this chapter are for purposes of convenience only and shall not control or affect the construction of this chapter.
(f) Sections 7-9A-406 and 7-9A-408 of the Uniform Commercial Code, and all successor statutes thereto, do not apply to any interest in a partnership, including all rights, powers, and interests arising under a partnership agreement or this chapter. This provision prevails over Sections 7-9A-406 and 7-9A-408 of the Uniform Commercial Code, and all successor statutes thereto, and is expressly intended to permit the enforcement of the provisions of a partnership agreement that would otherwise be ineffective under Sections 7-9A-406 and 7-9A-408 of the Uniform Commercial Code, and all successor statutes thereto.
(g) Division E of Article 3 of Chapter 1 shall have no application to this chapter.
(h) The terms president, vice president, secretary, and treasurer, as defined in Chapter 1, shall have no application to this chapter.
(i) Section 10A-1-2.13(c) shall have no application to this chapter.
(j) Action validly taken pursuant to one provision of this chapter shall not be deemed invalid solely because it is identical or similar in substance to an action that could have been taken pursuant to some other provision of this chapter but fails to satisfy one or more requirements prescribed by such other provision.
(Act 2018-125, §7; Act 2025-281, §6.)
(a) Except as otherwise provided in subsections (b) and (c):
(1) the partnership agreement governs relations among the partners as partners and between the partners and the partnership; and
(2) to the extent the partnership agreement does not otherwise provide for a matter described in subsection (a)(1), this chapter governs the matter.
(b)(1) To the extent that, at law or in equity, a partner or other person has duties, including fiduciary duties, to a partnership or to another partner or to another person that is a party to or is otherwise bound by a partnership agreement, the partner’s or other person’s duties may be expanded or restricted or eliminated by provisions in a written partnership agreement, but the implied contractual covenant of good faith and fair dealing may not be eliminated.
(2) A written partnership agreement may provide for the limitation or elimination of any and all liabilities for breach of contract and breach of duties, including fiduciary duties, of a partner or other person to a partnership or to another partner or to another person that is a party to or is otherwise bound by a partnership agreement, but a partnership agreement may not limit or eliminate liability for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing.
(3) A partner or other person shall not be liable to a partnership or to another partner or to another person that is a party to or is otherwise bound by a partnership agreement for breach of fiduciary duty for the partner’s or other person’s good faith reliance on the partnership agreement.
(4) A partnership agreement may provide that:
(A) a partner, dissociated partner, or transferee who fails to perform in accordance with, or to comply with the terms and conditions of, the partnership agreement shall be subject to specified penalties or specified consequences;
(B) at the time or upon the happening of events specified in the partnership agreement, a partner, dissociated partner, or transferee may be subject to specified penalties or specified consequences; and
(C) subject to Section 10A-8A-1.08(c), an act or transaction under the partnership agreement by the partnership, a partner, a dissociated partner, or a transferee is void or voidable.
(5) A penalty or consequence that may be specified under paragraph (4) of this subsection may include and take the form of reducing or eliminating the defaulting partner’s or transferee’s proportionate transferable interest in a partnership, subordinating the partner’s or transferee’s transferable interest to that of non-defaulting partners or transferees, forcing a sale of that transferable interest, forfeiting the defaulting partner’s or transferee’s transferable interest, the lending by other partners or transferees of the amount necessary to meet the defaulting partner’s or transferee’s commitment, a fixing of the value of the defaulting partner’s or transferee’s transferable interest by appraisal or by formula and redemption or sale of the transferable interest at that value, or other penalty or consequence.
(6) A written partnership agreement may supersede, in whole or in part, the provisions of Division C and Division D of Article 3 of Chapter 1.
(c) A partnership agreement may not:
(1) vary the nature of the partnership as a separate legal entity under Section 10A-8A-1.04(a);
(2) vary a partnership’s power under Section 10A-8A-1.05 to sue, be sued, and defend in its own name;
(3) vary the law applicable to a limited liability partnership under Section 10A-8A-1.06;
(4) restrict rights under this chapter of a person other than a partner, a dissociated partner, or a transferee;
(5) vary the requirements of Section 10A-8A-2.03;
(6) unreasonably restrict the right of access to books and records under Section 10A-8A-4.10, but the partnership agreement may impose reasonable restrictions on the availability and use of information obtained under those sections and may define appropriate remedies, including liquidated damages, for a breach of any reasonable restriction on use;
(7) eliminate the implied contractual covenant of good faith and fair dealing as provided under Section 10A-8A-1.08(b)(1);
(8) eliminate or limit the liability of a partner or other person for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing as provided under Section 10A-8A-1.08(b)(2);
(9) waive the requirements of Section 10A-8A-4.04(e);
(10) reduce the limitations period specified under Section 10A-8A-4.09(e) for an action commenced under other applicable law;
(11) waive the prohibition on issuance of a certificate of a transferable interest in bearer form under Section 10A-8A-5.02(c);
(12) vary the power of a person to dissociate as a partner under Section 10A-8A-6.02(a) except that the partnership agreement may require that the notice under Section 10A-8A-6.01(1) be in a writing or in a specific form thereof;
(13) vary the right of a court to expel a partner in the events specified in Section 10A-8A-6.01(5);
(14) vary the power of a court to decree dissolution in the circumstances specified in Section 10A-8A-8.01(4) or (5);
(15) vary the requirement to wind up the partnership’s business or not for profit activity as specified in Section 10A-8A-8.01(4), (5), (6), or (7);
(16) vary the right of a partner to approve or consent to the cancellation of a statement of limited liability partnership as specified in Section 10A-8A-10.01(m);
(17) vary the rights of a partner under Section 10A-8A-9.10; or
(18) vary the provisions of Section 10A-8A-1.14(c), (d), or (e).
(Act 2018-125, §7; Act 2024-413, §1.)
(a) A partnership is bound by and may enforce the partnership agreement, whether or not the partnership has itself manifested assent to the partnership agreement.
(b) A person that is admitted as a partner of a partnership becomes a party to and assents to the partnership agreement except as provided in Section 10A-8A-5.02(g).
(c) Two or more persons intending to be the initial partners of a partnership may make an agreement providing that upon the formation of the partnership, the agreement will become the partnership agreement.
(Act 2018-125, §7.)
(a) If a partnership agreement provides for the manner in which it may be amended, including by requiring the approval of a person who is not a party to the partnership agreement or the satisfaction of conditions, it may be amended only in that manner or as otherwise permitted by law, except that the approval of any person may be waived by that person and any conditions may be waived by all persons for whose benefit those conditions were intended.
(b) A partnership agreement may provide rights to any person, including a person who is not a party to the partnership agreement, to the extent set forth in the partnership agreement.
(c) The obligations of a partnership and its partners to a person in the person’s capacity as a transferee or dissociated partner are governed by the partnership agreement. A transferee and a dissociated partner are bound by the partnership agreement.
(d) If a writing that has been delivered by a partnership for filing in accordance with Chapter 1 and has become effective conflicts with a provision of the partnership agreement:
(1) the partnership agreement prevails as to partners, dissociated partners, and transferees; and
(2) the writing prevails as to other persons to the extent they reasonably rely on the writing.
(Act 2018-125, §7.)
A partnership shall maintain the following information:
(1) A current list of the full name and last known street and mailing address of each partner, in alphabetical order.
(2) Copies of any filed statement.
(3) Copies of the partnership’s federal, state, and local income tax returns and reports, if any, for the three most recent years.
(4) Copies of the then effective partnership agreement and any amendment thereto, in each case to the extent made in a writing.
(5) Copies of any financial statement of the partnership for the three most recent years.
(6) Unless contained in a partnership agreement made in a writing, a writing stating:
(A) the amount of cash, and a description and statement of the agreed value of the other benefits, contributed and agreed to be contributed by each partner;
(B) the times at which, or events on the happening of which, any additional contributions agreed to be made by each partner are to be made; and
(C) any events upon the happening of which the partnership is to be dissolved and its business or not for profit activity wound up.
(Act 2018-125, §7.)
A partner may lend money to and transact other business or not for profit activity with the partnership and has the same rights and obligations with respect to the loan or other transaction as a person that is not a partner.
(Act 2018-125, §7.)
Action requiring the consent of partners under this chapter may be taken without a meeting, and a partner may appoint a proxy to consent or otherwise act for the partner by signing a writing of appointment, either personally or by the partner’s attorney in fact.
(Act 2018-125, §7.)
(a) If a partnership agreement provides that an act or transaction is void or voidable when taken, then that act or transaction may be ratified or waived by:
(1) the partners or other persons entitled to ratify or waive that act or transaction under the partnership agreement;
(2) if the partnership agreement does not specify the approval required for the ratification or waiver, then those partners or other persons entitled to approve the amendment of the partnership agreement; or
(3) if the partnership agreement does not specify the approval required for the amendment of the partnership agreement, then all of the partners.
(b) If the void or voidable act or transaction was the issuance or transfer of any transferable interest, then for purposes of determining who may ratify or waive any act or transaction, the transferable interest purportedly issued or transferred shall be deemed not to have been issued or transferred.
(c) Any act or transaction ratified, or with respect to which the failure to comply with any requirements of the partnership agreement is waived, pursuant to this section shall be deemed validly taken at the time of the act or transaction.
(d) Upon application of the partnership, any partner, or any person claiming to be substantially and adversely affected by a ratification or waiver pursuant to this section, the designated court, and if none, the circuit court for the county in which the partnership’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the partnership’s most recent registered office is located, may hear and determine the validity and effectiveness of the ratification of, or waiver with respect to, any void or voidable act or transaction effectuated pursuant to this section, and in any such application, the partnership shall be named as a party and service of the application upon the registered agent of the partnership shall be deemed to be service upon the partnership, and no other party need be joined in order for the court to adjudicate the validity and effectiveness of the ratification or waiver, and the court may make such order respecting further or other notice of the application as the court deems proper under the circumstances; provided, that nothing herein limits or affects the right to serve process in any other manner now or hereafter provided by law, and this sentence is an extension of and not a limitation upon the right otherwise existing of service of legal process upon nonresidents.
(e) The provisions of this section shall not be construed to limit the accomplishment of a ratification or waiver of a void or voidable act or transaction by other means permitted by law.
(Act 2024-413, §2.)
(a) Except as otherwise provided in subsection (b), the association of two or more persons:
(1) to carry on as co-owners a business for profit forms a partnership, whether or not the persons intend to form a partnership; or
(2) to carry on any not for profit activity, forms a partnership when (A) the persons intend to form a partnership and (B) the persons deliver to the Secretary of State for filing a statement of not for profit partnership in accordance with Section 10A-8A-2.02(b) setting forth their intention to form a partnership to carry on a not for profit activity.
(b) An association formed under a statute other than this chapter, a predecessor statute, or a comparable statute of another jurisdiction is not a partnership under this chapter.
(c) In determining whether a partnership is formed under Section 10A-8A-2.01(a)(1), the following rules apply:
(1) Joint tenancy, tenancy in common, tenancy by the entireties, joint property, common property, or part ownership does not by itself establish a partnership, even if the co-owners share profits made by the use of the property.
(2) The sharing of gross returns does not by itself establish a partnership, even if the persons sharing them have a joint or common right or interest in property from which the returns are derived.
(3) A person who receives a share of the profits of a business is presumed to be a partner in the business, unless the profits were received in payment:
(i) of a debt by installments or otherwise;
(ii) for services as an independent contractor or of wages or other compensation to an employee;
(iii) of rent;
(iv) of an annuity or other retirement or health benefit to a beneficiary, representative, or designee of a deceased or retired partner;
(v) of interest or other charge on a loan, even if the amount of payment varies with the profits of the business, including a direct or indirect present or future ownership of the collateral, or rights to income, proceeds, or increase in value derived from the collateral; or
(vi) for the sale of the goodwill of a business or other property by installments or otherwise.
(Act 2018-125, §7.)
(a) A partnership other than a partnership that has an effective statement of not for profit partnership or an effective statement of limited liability partnership on file with the Secretary of State may deliver to the Secretary of State for filing a statement of partnership for the purpose of having its partnership agreement governed by the laws of this state in accordance with Section 10A-8A-1.06(d) and providing notice of its existence in accordance with Section 10A-8A-1.03(d)(1). A statement of partnership must contain all of the following:
(1) the name of the partnership which name must comply with Article 5 of Chapter 1;
(2) a statement that the partnership is governed by this chapter;
(3) the street and mailing address of its principal office;
(4) the street and mailing address of a registered office and the name of the registered agent at that office for service of process in this state which the partnership shall be required to maintain;
(5) a statement that the partnership was formed for the purpose of carrying on a for profit business;
(6) a statement that the partnership has two or more partners; and
(7) a statement that the partnership agreement is governed by the laws of this state, and if the partnership agreement is a written partnership agreement, a declaration that the written partnership agreement has a provision stating that the partnership agreement is governed by the laws of this state.
(b) A partnership other than a partnership that has an effective statement of partnership or an effective statement of limited liability partnership on file with the Secretary of State may deliver to the Secretary of State for filing a statement of not for profit partnership for the purpose of setting forth the partners’ intention to form a partnership to carry on a not for profit activity in accordance with Section 10A-8A-2.01(a)(2), having its partnership agreement governed by the laws of this state in accordance with Section 10A-8A-1.06(d), and providing notice of its existence in accordance with Section 10A-8A-1.03(d)(2). A statement of not for profit partnership must contain all of the following:
(1) the name of the partnership which name must comply with Article 5 of Chapter 1;
(2) the date that the partnership was formed pursuant to, or became governed by, the laws of this state;
(3) the street and mailing address of its principal office;
(4) the street and mailing address of a registered office and the name of the registered agent at that office for service of process in this state which the partnership shall be required to maintain;
(5) a statement that the partnership was formed for the purpose of carrying on a not for profit activity in accordance with Section 10A-8A-2.01(a)(2);
(6) a statement that the partnership has two or more partners; and
(7) a statement that the partnership agreement is governed by the laws of this state, and if the partnership agreement is a written partnership agreement, a declaration that the written partnership agreement has a provision stating that the partnership agreement is governed by the laws of this state.
(c) A statement of partnership and a statement of not for profit partnership may be amended or restated from time to time in accordance with Section 10A-1-4.26.
(d) A statement of partnership and a statement of not for profit partnership shall be executed by two or more partners authorized to execute the statement of partnership or statement of not for profit partnership.
(e) A statement of partnership and a statement of not for profit partnership shall be accompanied by a fee for the Secretary of State in the amount prescribed by Section 10A-1-4.31.
(f) If a partnership complies with this section, the Secretary of State shall file the statement of partnership or the statement of not for profit partnership, as applicable.
(g) A statement of partnership or a statement of not for profit partnership, as applicable, takes effect as determined under Article 4 of Chapter 1.
(h) A partnership that has filed a statement of partnership is for all purposes the same entity that existed before the statement of partnership was filed and continues to be a partnership under the laws of this state.
(i) A statement of partnership and a statement of not for profit partnership are filing instruments for the purposes of Chapter 1.
(Act 2018-125, §7; Act 2025-281, §6.)
(a) A statement may be delivered to the Secretary of State for filing. A certified copy of a statement of authority that was filed by the Secretary of State may be delivered to a judge of probate for filing in accordance with Section 10A-8A-3.03(f) and (g). A certified copy of a statement that is filed in an office in another jurisdiction may be delivered to the Secretary of State for filing, and once filed by the Secretary of State, in the case of a statement of authority which is intended to have a similar effect to that of a statement of authority under Section 10A-8A-3.03(f) or (g), may be delivered to the judge of probate for filing in accordance with Section 10A-8A-3.03(f) or (g). Either filing has the effect provided in this chapter with respect to partnership property located in or transactions that occur in this state.
(b) A certified copy of statement of authority filed in the office of the Secretary of State and delivered to the judge of probate for filing in the county or counties in which the partnership has real property, without more, shall have the effect of a recorded statement under this chapter with respect to real property located in that county or those counties. Any statement of authority recorded under the preceding sentence that is not a certified copy of a statement of authority filed in the office of the Secretary of State does not have the effect provided for recorded statements of authority in this chapter.
(c) Except as specifically provided otherwise in this chapter, a statement filed by a partnership must be executed by at least two partners. Other statements must be executed by a partner or other person authorized by this chapter. An individual who executes a statement as, or on behalf of, a partner or other person named as a partner in a statement shall personally declare under penalty of perjury that the contents of the statement are accurate.
(d) Except as specifically provided otherwise in this chapter, a person authorized by this chapter to file a statement may amend or cancel the statement by filing an amendment or cancellation that names the partnership, identifies the statement, and states the substance of the amendment or cancellation.
(e) A person who files a statement pursuant to this section shall promptly send a copy of the statement to every partner and to any other person named in the statement. Failure to send a copy of a statement to a partner or other person does not limit the effectiveness of the statement as to a person not a partner.
(f) The Secretary of State may collect a fee for filing or providing a certified copy of a statement in the amount prescribed in Section 10A-1-4.31. The office of the judge of probate may collect a fee for recording a certified copy of statement in the amount prescribed in Section 10A-1-4.31.
(g) Each statement permitted or required under this chapter to be delivered for filing to the Secretary of State or judge of probate is a filing instrument.
(Act 2018-125, §7.)
Property acquired by a partnership is property of the partnership and not of the partners individually.
(Act 2018-125, §7.)
(a) Property is partnership property if acquired in the name of:
(1) the partnership; or
(2) one or more partners with an indication in the instrument transferring title to the property of the person’s capacity as a partner or of the existence of a partnership but without an indication of the name of the partnership.
(b) Property is acquired in the name of the partnership by a transfer to:
(1) the partnership in its name; or
(2) one or more partners in their capacity as partners in the partnership, if the name of the partnership is indicated in the instrument transferring title to the property.
(c) Property is presumed to be partnership property if purchased with partnership assets, even if not acquired in the name of the partnership or of one or more partners with an indication in the instrument transferring title to the property of the person’s capacity as a partner or of the existence of a partnership.
(d) Property acquired in the name of one or more of the partners, without an indication in the instrument transferring title to the property of the person’s capacity as a partner or of the existence of a partnership and without use of partnership assets, is presumed to be separate property, even if used for partnership purposes.
(Act 2018-125, §7.)
Subject to the effect of a statement of authority under Section 10A-8A-3.03:
(1) Each partner is an agent of the partnership for the purpose of its business or not for profit activity. An act of a partner, including the execution of an instrument in the partnership name, for apparently carrying on in the ordinary course the partnership business or not for profit activity, or business or not for profit activity of the kind carried on by the partnership, binds the partnership, unless the partner had no authority to act for the partnership in the particular matter and the person with whom the partner was dealing knew or had notice that the partner lacked authority.
(2) An act of a partner which is not apparently for carrying on in the ordinary course the partnership business or not for profit activity, or business or not for profit activity of the kind carried on by the partnership, binds the partnership only if the act was authorized by the other partners.
(Act 2018-125, §7.)
(a) Partnership property may be transferred as follows:
(1) Subject to the effect of a statement of authority under Section 10A-8A-3.03, partnership property held in the name of the partnership may be transferred by an instrument of transfer executed by a partner in the partnership name.
(2) Partnership property held in the name of one or more partners with an indication in the instrument transferring the property to them of their capacity as partners or of the existence of a partnership, but without an indication of the name of the partnership, may be transferred by an instrument of transfer executed by the persons in whose name the property is held.
(3) Partnership property held in the name of one or more persons other than the partnership, without an indication in the instrument transferring the property to them of their capacity as partners or of the existence of a partnership, may be transferred by an instrument of transfer executed by the persons in whose name the property is held.
(b) A partnership may recover partnership property from a transferee only if it proves that execution of the instrument of initial transfer did not bind the partnership under Section 10A-8A-3.01 and:
(1) as to a subsequent transferee who gave value for property transferred under subsections (a)(1) and (2), proves that the subsequent transferee knew or had received notice that the person who executed the instrument of initial transfer lacked authority to bind the partnership; or
(2) as to a transferee who gave value for property transferred under subsection (a)(3), proves that the transferee knew or had notice that the property was partnership property and that the person who executed the instrument of initial transfer lacked authority to bind the partnership.
(c) A partnership may not recover partnership property from a subsequent transferee if the partnership would not have been entitled to recover the property, under subsection (b), from any earlier transferee of the property.
(Act 2018-125, §7.)
(a) A partnership may deliver to the Secretary of State for filing a statement of authority, which:
(1) must include the name of the partnership and:
(A) if the partnership has not filed a statement of partnership, a statement of not for profit partnership, or a statement of limited liability partnership, (i) the street and mailing addresses of its principal office, (ii) the name, street address, and mailing address of its registered agent, and (iii) if the Secretary of State has assigned a unique identifying number or other designation to the partnership, that number or designation; or
(B) if the partnership has filed a statement of partnership, a statement of not for profit partnership, or a statement of limited liability partnership, (i) the street address and mailing address of its principal office, (ii) the name, street address, and mailing address of its registered agent, and (iii) the unique identifying number or other designation assigned to the partnership by the Secretary of State.
(2) with respect to any position that exists in or with respect to the partnership, may state the authority, or limitations on the authority, of all persons holding the position to:
(A) sign an instrument transferring real property held in the name of the partnership; or
(B) enter into other transactions on behalf of, or otherwise act for or bind, the partnership; and
(3) may state the authority, or limitations on the authority, of a specific person to:
(A) sign an instrument transferring real property held in the name of the partnership; or
(B) enter into other transactions on behalf of, or otherwise act for or bind, the partnership.
(b) To amend or cancel a statement of authority filed by the Secretary of State, a partnership must deliver to the Secretary of State for filing an amendment or cancellation stating:
(1) the name of the partnership;
(2) if the partnership has not filed a statement of partnership, a statement of not for profit partnership, or a statement of limited liability partnership, the street and mailing addresses of the partnership’s principal office;
(3) if the partnership has filed a statement of partnership, a statement of not for profit partnership, or a statement of limited liability partnership, the name and street and mailing addresses of its registered agent;
(4) the date the statement of authority being affected became effective;
(5) the contents of the amendment or a declaration that the statement of authority is canceled; and
(6) the unique identifying number or other designation assigned to the partnership by the Secretary of State.
(c) A statement of authority affects only the power of a person to bind a partnership to persons that are not partners.
(d) Subject to subsection (c) and Section 10A-8A-1.03(d)(3) and except as otherwise provided in subsections (f), (g), and (h), a limitation on the authority of a person or a position contained in an effective statement of authority is not by itself evidence of any person’s knowledge or notice of the limitation.
(e) Subject to subsection (c), a grant of authority not pertaining to transfers of real property and contained in an effective statement of authority is conclusive in favor of a person that gives value in reliance on the grant, except to the extent that when the person gives value:
(1) the person has knowledge to the contrary;
(2) the statement of authority has been canceled or restrictively amended under subsection (b); or
(3) a limitation on the grant is contained in another statement of authority that became effective after the statement of authority containing the grant became effective.
(f) Subject to subsection (c), an effective statement of authority that grants authority to transfer real property held in the name of the partnership, a certified copy of which statement of authority is recorded in the office of the judge of probate in the county in which the real property is located, is conclusive in favor of a person that gives value in reliance on the grant without knowledge to the contrary, except to the extent that when the person gives value:
(1) the statement of authority has been canceled or restrictively amended under subsection (b), and a certified copy of the cancellation or restrictive amendment has been recorded in the office of the judge of probate in the county in which the real property is located; or
(2) a limitation on the grant is contained in another statement of authority that became effective after the statement of authority containing the grant became effective, and a certified copy of the later-effective statement is recorded in the office of the judge of probate in the county in which the real property is located.
(g) Subject to subsection (c), if a certified copy of an effective statement of authority containing a limitation on the authority to transfer real property held in the name of a partnership is recorded in the office of the judge of probate in the county in which the real property is located, all persons are deemed to know of the limitation with respect to the real property located in that county.
(h) Subject to subsection (i), an effective statement of dissolution is a cancellation of any filed statement of authority for the purposes of subsection (f) and is a limitation on authority for purposes of subsection (g).
(i) After a statement of dissolution becomes effective, a partnership may deliver to the Secretary of State for filing and, if appropriate, may record a statement of authority that is designated as a post-dissolution statement of authority. The statement operates as provided in subsections (f) and (g).
(j) Unless canceled earlier, an effective statement of authority is canceled by operation of law five years after the date on which the statement, or its most recent amendment, becomes effective. The cancellation is effective without recording under subsection (f) or (g).
(k) An effective statement of denial operates as a restrictive amendment under this section and may be recorded by certified copy for purposes of subsection (f)(1).
(l) If a partnership has not filed a statement of partnership, a statement of not for profit partnership, or a statement of limited liability partnership and the Secretary of State has not assigned a unique identifying number or other designation to that partnership, then the Secretary of State shall assign a unique identifying number or other designation to that partnership when that partnership delivers to the Secretary of State for filing that partnership’s statement of authority without the need of the partnership delivering to the Secretary of State for filing a statement of partnership, a statement of not for profit partnership, or a statement of limited liability partnership.
(Act 2018-125, §7; Act 2025-281, §6.)
A person named in a filed statement of authority granting that person authority may deliver to the Secretary of State for filing a statement of denial that:
(1) provides:
(A) the name of the partnership;
(B) the date the statement of authority to which the statement of denial pertains was filed by the filing officer; and
(C) the unique identifying number or other designation assigned to the partnership by the Secretary of State; and
(2) denies the grant of authority.
A statement of denial is a limitation on authority as provided in Section 10A-8A-3.03.
(Act 2018-125, §7; Act 2025-281, §6.)
(a) A partnership is liable for loss or injury caused to a person, or for a penalty incurred, as a result of a wrongful act or omission, or other actionable conduct, of a partner acting in the ordinary course of business or not for profit activity of the partnership or with authority of the partnership.
(b) If, in the ordinary course of business or not for profit activity of the partnership’s business or not for profit activity, or while acting with authority of the partnership, a partner receives or causes the partnership to receive money or property of a person not a partner, and the money or property is misapplied by a partner, the partnership is liable for the loss.
(Act 2018-125, §7.)
(a) Except as otherwise provided in subsection (b) or subsection (c), all partners are liable jointly and severally for all obligations of the partnership unless otherwise agreed by the claimant or provided by law.
(b) A person admitted as a partner into an existing partnership is not personally liable for any partnership obligation incurred before the person’s admission as a partner.
(c) Except as set forth in subsection (b) of Section 10A-8A-10.02, a debt, obligation, or other liability of a partnership incurred while the partnership is a limited liability partnership is solely the debt, obligation, or other liability of the limited liability partnership. Except as set forth in subsection (b) of Section 10A-8A-10.02, a partner in a limited liability partnership is not personally liable or accountable, directly or indirectly, including by way of indemnification, contribution, assessment, or otherwise, for debts, obligations, and liabilities of, or chargeable to, the limited liability partnership, or another partner or partners, whether arising in tort, contract, or otherwise, solely by reason of being such a partner or acting, or omitting to act, in such capacity, which such debts, obligations and liabilities occur, are incurred or are assumed while the partnership is a limited liability partnership. This subsection applies (1) despite anything inconsistent in the partnership agreement that existed immediately before the partnership becomes a limited liability partnership, and (2) regardless of the dissolution of the limited liability partnership.
(d) Subsection (c) of this section shall not affect the liability of a limited liability partnership to the extent of partnership assets for partnership debts, obligations and liabilities.
(e) A partner in a limited liability partnership is not a necessary or proper party to a proceeding by or against a limited liability partnership, the object of which is to recover any debts, obligations, or liabilities of, or chargeable to, the limited liability partnership, unless the partner is personally liable therefor under subsection (b) of Section 10A-8A-10.02.
(Act 2018-125, §7.)
(a) A partnership may sue and be sued in the name of the partnership.
(b) An action may be brought against the partnership and, except as provided in Section 10A-8A-3.06, against any or all of the partners in the same action or in separate actions.
(c) A judgment against a partnership is not by itself a judgment against a partner. A judgment against a partnership may not be satisfied from a partner’s assets unless there is also a judgment against the partner.
(d) A judgment creditor of a partner may not levy execution against the assets of the partner to satisfy a judgment based on a claim against the partnership unless the claim is for a debt, obligation, or liability for which the partner is personally liable as provided in Section 10A-8A-3.06 and either:
(1) a judgment based on the same claim has been obtained against the partnership and a writ of execution on the judgment has been returned unsatisfied in whole or in part;
(2) the partnership is a debtor in bankruptcy;
(3) the partner has agreed that the creditor need not exhaust partnership assets;
(4) a court grants permission to the judgment creditor to levy execution against the assets of a partner based on a finding that partnership assets subject to execution are clearly insufficient to satisfy the judgment, that exhaustion of partnership assets is excessively burdensome, or that the grant of permission is an appropriate exercise of the court’s equitable powers; or
(5) liability is imposed on the partner by law or contract independent of the existence of the partnership.
(e) This section applies to any partnership liability or obligation resulting from a representation by a partner or purported partner under Section 10A-8A-3.08.
(Act 2018-125, §7.)
Except as provided in Section 10A-8A-3.06:
(a) If a person, by words or conduct, purports to be a partner, or consents to being represented by another as a partner, in a partnership or with one or more persons not partners, the purported partner is liable to a person to whom the representation is made, if that person, relying on the representation, enters into a transaction with the actual or purported partnership. If the representation, either by the purported partner or by a person with the purported partner’s consent, is made in a public manner, the purported partner is liable to a person who relies upon the purported partnership even if the purported partner is not aware of being held out as a partner to the claimant. If partnership liability results, the purported partner is liable with respect to that liability as if the purported partner were a partner. If no partnership liability results, the purported partner is liable with respect to that liability jointly and severally with any other person consenting to the representation.
(b) If a person is thus represented to be a partner in an existing partnership, or with one or more persons not partners, the purported partner is an agent of persons consenting to the representation to bind them to the same extent and in the same manner as if the purported partner were a partner, with respect to persons who enter into transactions in reliance upon the representation. If all of the partners of the existing partnership consent to the representation, a partnership act or obligation results. If fewer than all of the partners of the existing partnership consent to the representation, the person acting and the partners consenting to the representation are jointly and severally liable.
(c) A person is not liable as a partner merely because the person is named by another in a statement of authority.
(d) A person does not continue to be liable as a partner merely because of a failure to file a statement of dissociation or to amend a statement of authority to indicate the partner’s dissociation from the partnership.
(e) Except as otherwise provided in subsections (a) and (b), persons who are not partners as to each other are not liable as partners to other persons.
(Act 2018-125, §7.)
(a) Each partner is deemed to have an account that is:
(1) credited with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, the partner contributes to the partnership and the partner’s share of the partnership profits; and
(2) charged with an amount equal to the money plus the value of any other property, net of the amount of any liabilities, distributed by the partnership to the partner and the partner’s share of the partnership losses provided that a partner shall not be charged with any share of partnership loss attributable to a debt, obligation, or liability for which the partner is not personally liable under Section 10A-8A-3.06 unless the loss is satisfied out of partnership assets.
(b) Each partner is entitled to an equal share of the partnership profits and, subject to the limitations in subsection (a)(2) of this section, is chargeable with a share of the partnership losses in proportion to the partner’s share of the profits.
(c) A partnership shall reimburse a partner for payments made and indemnify a partner for liabilities incurred by the partner in the ordinary course of the business or not for profit activity of the partnership or for the preservation of its business or not for profit activity or property; provided, however, no partner in a limited liability partnership shall be required as a consequence of the indemnification to make any payment on behalf of the limited liability partnership to any other partners to the extent that the payment would be inconsistent with Sections 10A-8A-3.06, 10A-8A-8.06, or 10A-8A-8.07.
(d) A partnership shall reimburse a partner for an advance beyond the amount of capital the partner agreed to contribute.
(e) A payment or advance made by a partner which gives rise to a partnership obligation under subsection (c) or (d) constitutes a loan to the partnership which accrues interest from the date of the payment or advance.
(f) Each partner has equal rights in the management and conduct of the partnership business or not for profit activity.
(g) A partner may use or possess partnership property only on behalf of the partnership.
(h) A partner is not entitled to remuneration for services performed for the partnership, except for reasonable compensation for services rendered in winding up the business or not for profit activity of the partnership.
(i) A difference arising as to a matter in the ordinary course of business or not for profit activity of a partnership may be decided by a majority of the partners. An act outside the ordinary course of business or not for profit activity of a partnership and an amendment to the partnership agreement may be undertaken only with the consent of all of the partners.
(j) This section does not affect the obligations of a partnership to other persons under Section 10A-8A-3.01.
(Act 2018-125, §7.)
(a) The initial partners of a partnership are admitted as partners upon the formation of the partnership.
(b) After formation, a person is admitted as a partner of the partnership:
(1) as provided in the partnership agreement;
(2) as the result of a transaction effective under Article 9 of this chapter or Article 8 of Chapter 1;
(3) with the consent of all the partners; or
(4) as provided in Section 10A-8A-8.01(6) or 10A-8A-8.01(7).
(c) Each person to be admitted as a partner to a partnership formed under either Section 10A-8A-2.01(a)(1) or 10A-8A-2.01(a)(2) may be admitted as a partner without:
(1) acquiring a transferable interest; or
(2) making or being obligated to make a contribution to the partnership.
(Act 2018-125, §7.)
A contribution by a partner may be made to a partnership as agreed by the partners.
(Act 2018-125, §7.)
(a) A partner’s obligation to make a contribution to a partnership is not excused by the partner’s death, disability, or other inability to perform personally.
(b) If a partner does not make a contribution required by an enforceable promise, the partner or the partner’s estate is obligated, at the election of the partnership, to contribute money equal to the value of the portion of the contribution that has not been made. The foregoing election shall be in addition to, and not in lieu of, any other rights, including the right to specific performance, that the partnership may have under the partnership agreement or applicable law.
(c) The obligation of a partner to make a contribution to a partnership may be compromised only by consent of all partners. A conditional obligation of a partner to make a contribution to a partnership may not be enforced unless the conditions of the obligation have been satisfied or waived as to or by that partner. Conditional obligations include contributions payable upon a discretionary call of a partnership before the time the call occurs.
(d) A creditor of a limited liability partnership which extends credit or otherwise acts in reliance on an obligation described in subsection (a), without notice of any compromise under this subsection, may enforce the original obligation.
(e) A promise by a partner to make a contribution to a partnership is not enforceable unless set forth in a writing signed by the partner.
(Act 2018-125, §7.)
All partners shall share equally in any distributions made by a partnership before its dissolution and winding up.
(Act 2018-125, §7.)
Subject to Section 10A-8A-7.01, a partner has a right to a distribution before the dissolution and winding up of a partnership as provided in the partnership agreement. A decision to make a distribution before the dissolution and winding up of the partnership is a decision in the ordinary course of the business or not for profit activity of the partnership.
(Act 2018-125, §7.)
A partner does not have a right to demand and receive a distribution from a partnership in any form other than money. Except as otherwise provided in Section 10A-8A-8.07, a partnership may distribute an asset in kind if each partner receives a percentage of the asset in proportion to the partner’s share of distributions.
(Act 2018-125, §7.)
If a partner becomes entitled to receive a distribution, the partner has the status of, and is entitled to all remedies available to, a creditor of the partnership with respect to the distribution. However, the partnership’s obligation to make a distribution is subject to offset for any amount owed to the partnership by the partner or dissociated partner on whose account the distribution is made.
(Act 2018-125, §7.)
(a) A limited liability partnership shall not make a distribution to a partner to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the limited liability partnership, other than liabilities to partners on account of their transferable interests and liabilities for which the recourse of creditors is limited to specific property of the limited liability partnership, exceed the fair value of the assets of the limited liability partnership, except that the fair value of the property that is subject to a liability for which recourse of creditors is limited shall be included in the assets of the limited liability partnership only to the extent that the fair value of the property exceeds that liability.
(b) A partner who consents to a distribution in violation of subsection (a) or the partnership agreement, and who knew at the time of the distribution that the distribution violated subsection (a) or the partnership agreement, shall be liable to the limited liability partnership for the amount of that distribution.
(c) A partner who receives a distribution in violation of subsection (a) or the partnership agreement, and who knew at the time of the distribution that the distribution violated subsection (a) or the partnership agreement, shall be liable to the limited liability partnership for the amount of the distribution received by that partner. A partner who receives a distribution in violation of subsection (a) or the partnership agreement, and who did not know at the time of the distribution that the distribution violated subsection (a) or the partnership agreement, shall not be liable for the amount of the distribution received by that partner.
(d) Except as provided in subsection (e), this section shall not affect any obligation or liability of a partner under other applicable law for the amount of a distribution.
(e) An action under this section or other applicable law is barred if not commenced within two years after the distribution.
(f) For purposes of subsection (a), “distribution” does not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of the limited liability partnership’s business or not for profit activity under a bona fide retirement plan or other benefits program.
(g) This section shall not apply to distributions made in accordance with Section 10A-8A-8.09.
(Act 2018-125, §7.)
(a) Subject to subsection (f), a partner, without having any particular purpose for seeking the information, may inspect and copy during regular hours at a reasonable location specified by the partnership, required information and any other records maintained by the partnership regarding the partnership’s business or not for profit activity and financial condition.
(b) Subject to subsection (f), each partner and the partnership shall furnish to a partner:
(1) without demand, any information concerning the partnership’s business or not for profit activity reasonably required for the proper exercise of the partner’s rights and duties under the partnership agreement or this chapter; and
(2) on demand, any other information concerning the partnership’s business or not for profit activity, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances.
(c) Subject to subsections (e) and (f), on 10 days’ demand made in a writing received by the partnership, a person dissociated as a partner may have access to the information and records described in subsection (a) at the location specified in subsection (a) if:
(1) the information or writing pertains to the period during which the person was a partner;
(2) the person seeks the information or record in good faith; and
(3) it is determined that:
(i) the person seeks the information for a purpose reasonably related to the person’s interest as a partner;
(ii) the person’s demand describes with reasonable particularity the information sought and the purpose for seeking the information; and
(iii) the information sought is directly connected to the person’s purpose.
(d) Within 10 days after receiving a demand pursuant to subsection (c), the partnership in a writing shall inform the person that made the demand:
(1) what information the partnership will provide in response to the demand;
(2) when and where the partnership will provide the information;
(3) if the partnership declines to provide any demanded information, the partnership’s reasons for declining; and
(4) what, if any, restrictions will be imposed pursuant to the partnership agreement or subsection (f).
(e) If a partner dies, Section 10A-8A-5.04 applies.
(f) In addition to any restriction or condition stated in its partnership agreement, a partnership, as to a matter within the ordinary course of its business or not for profit activity, may:
(1) impose reasonable restrictions and conditions on access to and use of information to be furnished under this section, including designating information confidential and imposing nondisclosure and safeguarding obligations on the recipient;
(2) keep confidential from the partners and any other person, for such period of time as the partnership deems reasonable, any information that the partnership reasonably believes to be in the nature of trade secrets or other information the disclosure of which the partnership in good faith believes is not in the best interest of the partnership or could damage the partnership or its business or not for profit activity, or that the partnership is required by law or by agreement with a third party to keep confidential; and
(3) redact portions of the records to be inspected and copied to the extent the portions so redacted are not directly related to the partner’s or other person’s purpose.
In any dispute concerning the reasonableness of a restriction under this subsection, the partnership has the burden of proving reasonableness.
(g) A partnership may charge a person that makes a demand under this section reasonable costs of copying, limited to the costs of labor and material.
(h) A partner or person dissociated as a partner may exercise the rights under this section through an attorney or other agent. Any restriction imposed under subsection (f) or by the partnership agreement applies both to the attorney or other agent and to the partner or person dissociated as a partner. If the demanding person’s agent or attorney is to inspect and copy the books and records of the partnership, the demand shall be accompanied by a power of attorney or other writing which authorizes the agent or attorney to so act on behalf of the demanding person.
(i) The rights under this section do not extend to a person as transferee, but the rights under subsection (c) of a person dissociated as a partner may be exercised by the legal representative of an individual who dissociated as a partner under Section 10A-8A-6.01(6).
(j) The rights under this section may be denied by the partnership if the partnership determines that the demanding person has within two years preceding his, her, or its demand improperly used any information secured through any prior examination of the records of the partnership.
(k) If a partnership does not within a reasonable time allow a person who complies with the requirements of this section to inspect and copy the records required by this section, the person who complies with this section may apply to the designated court, and if none, the circuit court for the county in which the partnership’s principal office is located in this state, and if none in this state, the circuit court for the county in which the partnership’s most recent registered office is located for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this subsection on an expedited basis. If the court orders inspection and copying of the records demanded under this section, it may impose reasonable restrictions on their confidentiality, use, or distribution by the demanding person and the court shall also order the partnership to pay the demanding person’s expenses incurred to obtain the order unless the partnership establishes that the partnership refused inspection in good faith because the partnership had:
(1) a reasonable basis for doubt about the right of the demanding person to inspect the records demanded; or
(2) required reasonable restrictions on the confidentiality, use, or distribution of the records demanded to which the demanding person had been unwilling to agree. If the partnership has declined to deliver or make available the records because the demanding person had been unwilling to agree to restrictions proposed by the partnership on the confidentiality, use, or distribution of the records, the partnership shall have the burden of demonstrating that the restrictions proposed by the partnership were reasonable.
(Act 2018-125, §7; Act 2021-299, §5; Act 2026-495, §1.)
(a) The duties that a partner has to the partnership and to the other partners include the duty of loyalty and the duty of care as described in subsections (b) and (c).
(b) A partner’s duty of loyalty to the partnership and to the other partners includes each of the following:
(1) To account to the partnership and to hold as trustee for it any property, profit, or benefit derived by the partner in the conduct or winding up of the partnership’s business or not-for-profit activity or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity.
(2) To refrain from dealing with the partnership in the conduct or winding up of the partnership’s business or not-for-profit activity as or on behalf of a party having an interest adverse to the partnership.
(3) To refrain from competing with the partnership in the conduct of the partnership’s business or not-for-profit activity before the dissolution of the partnership.
(c) A partner’s duty of care to the partnership and to the other partners in the conduct or winding up of the partnership’s business or not-for-profit activity includes refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
(d) A partner shall discharge the duties to the partnership and to the other partners under this chapter and under the partnership agreement and exercise any rights consistently with the implied contractual covenant of good faith and fair dealing.
(e) A partner does not violate a duty or obligation under this chapter or under the partnership agreement merely because the partner’s conduct furthers the partner’s own interest.
(Act 2018-125, §7; Act 2019-304, §1.)
A partner of a partnership shall be fully protected in relying in good faith upon the records of the partnership and upon information, opinions, reports, or statements presented by another partner or agent of the partnership, or by any other person as to matters the partner reasonably believes are within that other person’s professional or expert competence, including information, opinions, reports, or statements as to the value and amount of the assets, liabilities, profits, or losses of the partnership, or the value and amount of assets or reserves or contracts, agreements, or other undertakings that would be sufficient to pay claims and obligations of the partnership, or to make reasonable provision to pay those claims and obligations, or any other facts pertinent to the existence and amount of assets from which distributions to partners or creditors might properly be paid.
(Act 2018-125, §7.)
(a) Except as provided in Sections 10A-8A-3.06, 10A-8A-8.06, or 10A-8A-8.07, a partnership may maintain an action against a partner for a breach of the partnership agreement, or for the violation of a duty to the partnership, causing harm to the partnership.
(b) Except as provided in Sections 10A-8A-3.06, 10A-8A-8.06, or 10A-8A-8.07, a partner may maintain an action against the partnership or another partner for legal or equitable relief, with or without an accounting as to partnership business or not for profit activity, to:
(1) enforce the partner’s rights under the partnership agreement;
(2) enforce the partner’s rights under this chapter, including:
(i) the partner’s rights under Sections 10A-8A-4.01, 10A-8A-4.03, or 10A-8A-4.04;
(ii) the partner’s right on dissociation to have the partner’s transferable interest in the partnership purchased pursuant to Section 10A-8A-7.01 or enforce any other right under Article 6 or 7; or
(iii) the partner’s right to compel a dissolution and winding up of the partnership’s business or not for profit activity under Section 10A-8A-8.01 or enforce any other right under Article 8; or
(3) enforce the rights and otherwise protect the interests of the partner, including rights and interests arising independently of the partnership relationship.
(c) The accrual of, and any time limitation on, a right of action for a remedy under this section is governed by other law. A right to an accounting upon a dissolution and winding up does not revive a claim barred by law.
(Act 2018-125, §7.)
(a) If a partnership for a definite term or particular undertaking is continued, without an express agreement, after the expiration of the term or completion of the undertaking, the rights and duties of the partners remain the same as they were at the expiration or completion, so far as is consistent with a partnership at will.
(b) If the partners, or those of them who habitually acted in the business or not for profit activity during the term or undertaking, continue the business or not for profit activity without any settlement or liquidation of the partnership, they are presumed to have agreed that the partnership will continue.
(Act 2018-125, §7.)
The only interest of a partner which is transferable is the partner’s transferable interest. A transferable interest is personal property.
(Act 2018-125, §7.)
(a) A transfer, in whole or in part, of a partner’s transferable interest:
(1) is permissible;
(2) does not by itself cause the partner’s dissociation;
(3) does not by itself cause a dissolution and winding up of the partnership; and
(4) subject to Section 10A-8A-5.04, does not entitle the transferee to:
(A) participate in the management or conduct of the partnership’s business or not for profit activity; or
(B) except as otherwise provided in subsection (d), have access to required information, records, or other information concerning the partnership’s business or not for profit activity.
(b) A transferee has a right:
(1) to receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled;
(2) to receive upon the dissolution and winding up of the partnership, in accordance with the transfer, the net amount otherwise distributable to the transferor; and
(3) to seek under Section 10A-8A-8.01(5) a judicial determination that it is equitable to wind up the partnership business or not for profit activity.
(c) A transferable interest may be evidenced by a certificate of transferable interest issued by the partnership. A partnership agreement may provide for the transfer of the transferable interest represented by the certificate and make other provisions with respect to the certificate. No certificate of transferable interest shall be issued in bearer form.
(d) In a dissolution and winding up, a transferee is entitled to an account of the partnership’s transactions only from the date of dissolution.
(e) Except as otherwise provided in Sections 10A-8A-6.01(4), 10A-8A-6.01(11), and 10A-8A-6.01(12), when a partner transfers a transferable interest, the transferor retains the rights of a partner other than the right to distributions transferred and retains all duties and obligations of a partner.
(f) A partnership need not give effect to a transferee’s rights under this section until the partnership has notice of the transfer.
(g) When a partner transfers a transferable interest to a person that is admitted as a partner with respect to the transferred interest, the transferee is liable for the partner’s obligations under Sections 10A-8A-4.04 and 10A-8A-4.09 to the extent that the obligations are known to the transferee when the transferee voluntarily accepts admission as a partner.
(h) Notwithstanding anything in Title 43 to the contrary, a partnership agreement may provide that a transferable interest may or shall be transferred in whole or in part, with or without consideration, to one or more persons at the death of the holder of the transferable interest. Any transferable interest transferred pursuant to this subsection shall be subject to any outstanding charging order under Section 10A-8A-5.03. This subsection does not limit the rights of creditors of holders of transferable interests against transferees under this chapter or other laws of this state.
(Act 2018-125, §7; Act 2025-281, §6; Act 2026-495, §1.)
(a) On application to a court of competent jurisdiction by any judgment creditor of a partner or transferee, the court may charge the transferable interest of the judgment debtor with payment of the unsatisfied amount of the judgment with interest. To the extent so charged and after the partnership has been served with the charging order, the judgment creditor has only the right to receive any distribution or distributions to which the judgment debtor would otherwise be entitled in respect of the transferable interest.
(b) The partnership, after being served with a charging order and its terms, shall be entitled to pay or deposit any distribution or distributions to which the judgment debtor would otherwise be entitled in respect of the charged transferable interest into the hands of the clerk of the court so issuing the charging order, and the payment or deposit shall discharge the partnership and the judgment debtor from liability for the amount so paid or deposited and any interest that might accrue thereon. Upon receipt of the payment or deposit, the clerk of the court shall notify the judgment creditor of the receipt of the payment or deposit. The judgment creditor, after any payment or deposit into the court, shall petition the court for payment of so much of the amount paid or deposited as is held by the court as may be necessary to pay the judgment creditor’s judgment. To the extent the court has excess amounts paid or deposited on hand after the payment to the judgment creditor, the excess amounts paid or deposited shall be distributed to the judgment debtor and the charging order shall be extinguished. The court, may in its discretion, order the clerk to deposit, pending the judgment creditor’s petition, any money paid or deposited with the clerk, in an interest bearing account at a bank authorized to receive deposits of public funds.
(c) A charging order constitutes a lien on the judgment debtor’s transferable interest.
(d) Subject to subsection (c):
(1) a judgment debtor that is a partner retains the rights of a partner and remains subject to all duties and obligations of a partner; and
(2) a judgment debtor that is a transferee retains the rights of a transferee and remains subject to all duties and obligations of a transferee.
(e) This chapter does not deprive any partner or transferee of the benefit of any exemption laws applicable to the partner’s or transferee’s transferable interest.
(f) This section provides the exclusive remedy by which a judgment creditor of a partner or transferee may satisfy a judgment out of the judgment debtor’s transferable interest and the judgment creditor shall have no right to foreclose, under this chapter or any other law, upon the charging order, the charging order lien, or the judgment debtor’s transferable interest. A judgment creditor of a partner or transferee shall have no right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of a partnership. Court orders for actions or requests for accounts and inquiries that the judgment debtor might have made are not available to the judgment creditor attempting to satisfy the judgment out of the judgment debtor’s transferable interest and may not be ordered by a court.
(Act 2018-125, §7.)
If a partner dies, the deceased partner’s personal representative or other legal representative may:
(a) for the period of time, if any, that the deceased partner’s personal representative or other legal representative holds the deceased partner’s transferable interest:
(1) exercise the rights of a holder of transferable interests under this chapter;
(2) exercise the rights of a transferee under Section 10A-8A-5.02; and
(3) for purposes of settling the estate, exercise the rights of a current partner under Section 10A-8A-4.10; and
(b) for the period of time that the deceased partner’s personal representative or other legal representative does not hold the deceased partner’s transferable interest, for purposes of settling the estate, exercise the rights of a person dissociated as a partner under Section 10A-8A-4.10.
(Act 2018-125, §7; Act 2025-281, §6.)
A person is dissociated from a partnership as a partner upon the occurrence of any of the following events:
(1) the partnership has notice of the person’s express will to dissociate as a partner, except that if the person specifies a dissociation date later than the date the partnership had notice, then the person is dissociated as a partner on that later date;
(2) an event stated in the partnership agreement as causing the person’s dissociation as a partner occurs;
(3) the person is expelled as a partner pursuant to the partnership agreement;
(4) the person is expelled as a partner by the unanimous consent of the other partners if:
(A) it is unlawful to carry on the partnership’s business or not for profit activity with the person as a partner;
(B) there has been a transfer of all of the person’s transferable interest in the partnership, other than a transfer for security purposes;
(C) the person is an organization and, within 90 days after the partnership notifies the person that it will be expelled as a partner because it has filed a statement of dissolution or the equivalent, or its right to conduct business or not for profit activity has been suspended by its jurisdiction of formation, the statement of dissolution or the equivalent has not been revoked or its right to conduct business or not for profit activity has not been reinstated; or
(D) the person is an organization and, within 90 days after the partnership notifies the person that it will be expelled as a partner because the person has been dissolved and its business or not for profit activity is being wound up, the organization has not been reinstated or the dissolution and winding up have not been revoked or cancelled;
(5) on application by the partnership, the person is expelled as a partner by judicial order because the person:
(A) has engaged, or is engaging, in wrongful conduct that has adversely and materially affected, or will adversely and materially affect, the partnership’s business or not for profit activity;
(B) has willfully or persistently committed, or is willfully or persistently committing, a material breach of the partnership agreement or the person’s duty or obligation under this chapter or other applicable law; or
(C) has engaged, or is engaging, in conduct relating to the business or not for profit activity of the partnership that makes it not reasonably practicable to carry on the business or not for profit activity with the person as partner;
(6) in the case of a person who is an individual, and the person dies, there is appointed a guardian or general conservator for the person or there is a judicial determination that the person has otherwise become incapable of performing the person’s duties as a partner under this chapter or the partnership agreement;
(7) the person becomes a debtor in bankruptcy, executes an assignment for the benefit of creditors, or seeks, consents, or acquiesces to the appointment of a trustee, receiver, or liquidator of the person or of all or substantially all of the person’s property;
(8) in the case of a person that is a trust or is acting as a partner by virtue of being a trustee of a trust, the trust’s entire transferable interest in the partnership is distributed, but not solely by reason of the substitution of a successor trustee;
(9) in the case of a person that is an estate or is acting as a partner by virtue of being a personal representative of an estate, the estate’s entire transferable interest in the partnership is distributed, but not solely by reason of the substitution of a successor personal representative;
(10) in the case of a person that is not an individual, the legal existence of the person otherwise terminates;
(11) the transfer of a partner’s entire remaining transferable interest to another partner;
(12) the transfer of a partner’s entire remaining transferable interest to a transferee upon the transferee’s becoming a partner; or
(13) the partnership’s participation in a conversion or merger under Article 9, or Article 8 of Chapter 1 of this title if the partnership:
(A) is not the converted or surviving entity; or
(B) is the converted or surviving entity but, as a result of the conversion or merger, the person ceases to be a partner.
(Act 2018-125, §7.)
(a) A person has the power to dissociate as a partner at any time, rightfully or wrongfully, by express will pursuant to Section 10A-8A-6.01(1).
(b) A person’s dissociation is wrongful only if:
(1) it is in breach of an express provision of the partnership agreement; or
(2) in the case of a partnership for a definite term or particular undertaking, before the expiration of the term or the completion of the undertaking if any of the following apply:
(A) the person dissociates as a partner by express will, unless the dissociation follows not later than 90 days after another person’s dissociation by death or otherwise under Section 10A-8A-6.01(6) through (10) or wrongful dissociation under this subsection;
(B) the person is expelled as a partner by judicial order under Section 10A-8A-6.01(5);
(C) the person is dissociated under Section 10A-8A-6.01(7); or
(D) in the case of a person that is not a trust other than a business trust, an estate, or an individual, the person is expelled or otherwise dissociated because it willfully dissolved or terminated.
(c) A person that wrongfully dissociates as a partner is liable to the partnership and to the other partners for damages caused by the dissociation. The liability is in addition to any debt, obligation, or other liability of the partner to the partnership or the other partners.
(Act 2018-125, §7.)
(a) If a person’s dissociation results in a dissolution and winding up of the partnership business or not for profit activity, Article 8 applies; otherwise, Article 7 applies.
(b) Upon a person’s dissociation as a partner:
(1) the person’s right to participate in the management and conduct of the partnership business or not for profit activity terminates, except as provided in Section 10A-8A-8.03;
(2) the person’s duty of loyalty under Section 10A-8A-4.11(b)(3) terminates; and
(3) the person’s duty of loyalty under Section 10A-8A-4.11(b)(1) and (2) and duty of care under Section 10A-8A-4.11(c) continue only with regard to matters arising and events occurring before the person’s dissociation, unless the partner participates in winding up the partnership’s business or not for profit activity pursuant to Section 10A-8A-8.03.
(Act 2018-125, §7.)
(a) If a person is dissociated as a partner from a partnership without resulting in a dissolution and winding up of the partnership business or not for profit activity under Section 10A-8A-8.01, the partnership shall cause that person’s transferable interest in the partnership owned by that person at the time of dissociation to be purchased for a buyout price determined pursuant to subsection (b).
(b) The buyout price of the transferable interest owned by the person at the time of dissociation as a partner is an amount equal to the fair value of that person’s transferable interest as of the date of dissociation. Interest on the buyout price must be paid from the date of dissociation to the date of payment.
(c) Damages for wrongful dissociation under Section 10A-8A-6.02(b) and (c), and all other amounts owing, whether or not presently due, from the person dissociated as a partner to the partnership, must be offset against the buyout price. Interest on damages for wrongful dissociation must be paid from the date of the wrongful dissociation to the date of payment. Interest on all other amounts, whether or not presently due, must be paid from the date the amount owed becomes due to the date of payment.
(d) A partnership shall indemnify a person dissociated as a partner whose transferable interest is being purchased against all partnership liabilities, whether incurred before or after the dissociation, except liabilities incurred by an act of the person dissociated as a partner under Section 10A-8A-7.02.
(e) If no agreement for the purchase of the transferable interests of a person dissociated as a partner is reached within 120 days after a written demand for payment, the partnership shall pay, or cause to be paid, in cash to the person dissociated as a partner the amount the partnership estimates to be the buyout price and accrued interest, reduced by any offsets and accrued interest under subsection (c).
(f) If a deferred payment is authorized under subsection (h), the partnership may tender a written offer to pay the amount it estimates to be the buyout price and accrued interest, reduced by any offsets under subsection (c), stating the time of payment, the amount and type of security for payment, and the other terms and conditions of the obligation.
(g) The payment or tender required by subsection (e) or (f) must be accompanied by the following:
(1) a written statement of partnership assets and liabilities as of the date of dissociation;
(2) the latest available partnership balance sheet and income statement, if any;
(3) a written explanation of how the estimated amount of the payment was calculated; and
(4) written notice which shall state that the payment is in full satisfaction of the obligation to purchase unless, within 120 days after the written notice, the person dissociated as a partner commences an action to determine the buyout price of that person’s transferable interest, any offsets under subsection (c), or other terms of the obligation to purchase.
(h) A person that wrongfully dissociates as a partner before the expiration of a definite term or the completion of a particular undertaking is not entitled to payment of any portion of the buyout price until the expiration of the term or completion of the undertaking, unless the person establishes to the satisfaction of the court that earlier payment will not cause undue hardship to the business or not for profit activity of the partnership. A deferred payment under this subsection must bear interest and, to the extent it would not cause undue hardship to the business or not for profit activity of the partnership, be adequately secured.
(i) A person dissociated as a partner may maintain an action against the partnership, pursuant to Section 10A-8A-4.13(b)(2)(ii), to determine the buyout price of that person’s transferable interest under subsection (b), any offsets under subsection (c), or other terms of the obligation to purchase. The action must be commenced within 120 days after the partnership has tendered payment or an offer to pay or within one year after written demand for payment if no payment or offer to pay is tendered. The court shall determine the buyout price of that person’s transferable interest under subsection (b), any offset due under subsection (c), and accrued interest, and enter judgment for any additional payment or refund. If deferred payment is authorized under subsection (h), the court shall also determine the security, if any, for payment and other terms of the obligation to purchase. The court may assess reasonable attorney’s fees and the fees and expenses of appraisers or other experts for a party to the action, in amounts the court finds equitable, against a party that the court finds acted arbitrarily, vexatiously, or not in good faith. The finding may be based on the partnership’s failure to tender payment or an offer to pay or to comply with subsection (g).
(Act 2018-125, §7.)
(a) For one year after a person dissociates as a partner without resulting in a dissolution and winding up of the partnership business or not for profit activity, the partnership, including a surviving partnership or other surviving entity under Article 9 of this chapter and Article 8 of Chapter 1, is bound by an act of the person dissociated as a partner which would have bound the partnership under Section 10A-8A-3.01 before dissociation only if at the time of entering into the transaction the other party:
(1) reasonably believed that the person dissociated as a partner was then a partner and reasonably relied on such belief in entering into the transaction;
(2) did not have notice of the person’s dissociation as a partner; and
(3) is not deemed to have had knowledge or notice under Section 10A-8A-1.03.
(b) A person dissociated as a partner is liable to the partnership for any damage caused to the partnership arising from an obligation incurred by the person dissociated as a partner after dissociation for which the partnership is liable under subsection (a).
(Act 2018-125, §7.)
(a) A person’s dissociation as a partner does not of itself discharge that person’s liability for a partnership obligation incurred before dissociation. A person dissociated as a partner is not liable for a partnership obligation incurred after dissociation, except as provided in subsection (b).
(b) A person that dissociates as a partner without resulting in a dissolution and winding up of the partnership business or not for profit activity is liable as a partner to the other party in a transaction entered into by the partnership, or a surviving partnership or other surviving entity under Article 9 of this chapter or Article 8 of Chapter 1, within one year after the partner’s dissociation, only if the partner is liable for the obligation under Section 10A-8A-3.06 and at the time of entering into the transaction the other party:
(1) reasonably believed that the person dissociated as a partner was then a partner and reasonably relied on such belief in entering into the transaction;
(2) did not have notice of the person’s dissociation; and
(3) is not deemed to have had knowledge or notice under Section 10A-8A-1.03 of the person’s dissociation.
(c) By agreement with the partnership creditor and the partners continuing the business or not for profit activity, a person dissociated as a partner may be released from liability for a partnership obligation.
(d) A person dissociated as a partner is released from liability for a partnership obligation if a partnership creditor, with notice of the person’s dissociation but without the person’s consent, agrees to a material alteration in the nature or time of payment of a partnership obligation.
(Act 2018-125, §7.)
(a) A person dissociated as a partner or the partnership may file a statement of dissociation stating the name of the partnership and that the person is dissociated as a partner from the partnership.
(b) A statement of dissociation is a limitation on the authority of a person dissociated as a partner for the purposes of Section 10A-8A-3.03.
(Act 2018-125, §7.)
Continued use of a partnership name, or a person’s name that is dissociated as a partner as part thereof, by partners continuing the business or not for profit activity does not of itself make the person dissociated as a partner liable for an obligation of the partners or the partnership continuing the business or not for profit activity.
(Act 2018-125, §7.)
A partnership is dissolved, and its business or not for profit activity must be wound up, upon the occurrence of the first of the following events:
(1) in a partnership at will, the partnership knows or has notice of a person’s express will to dissociate as a partner, other than a partner that has dissociated under Section 10A-8A-6.01(2) through (10), but, if the person has specified a dissociation date later than the date the partnership knew or had notice, on the later date;
(2) in a partnership for a definite term or particular undertaking:
(i) within 90 days after a partner’s dissociation by death or otherwise under Section 10A-8A-6.01(6) through (10), or a partner’s wrongful dissociation under Section 10A-8A-6.02(b), at least half of the remaining partners affirmatively consent to dissolve the partnership and wind up the partnership business or not for profit activity, for which purpose a partner’s rightful dissociation pursuant to Section 10A-8A-6.02(b)(2)(A) constitutes the expression of that partner’s will to wind up the business or not for profit activity of the partnership;
(ii) the consent of all of the partners to dissolve and wind up the partnership’s business or not for profit activity; or
(iii) the expiration of the term or the completion of the undertaking;
(3) an event or circumstance that the partnership agreement states causes dissolution;
(4) on application by a partner, the entry of an order by a court of competent jurisdiction dissolving the partnership on the grounds that it is not reasonably practicable to carry on the partnership’s business or not for profit activity in conformity with the partnership agreement;
(5) on application by a transferee of a partner’s transferable interest, a judicial determination that it is equitable to wind up the partnership business or not for profit activity:
(i) after the expiration of the term or completion of the undertaking, if the partnership was for a definite term or particular undertaking at the time of the transfer; or
(ii) at any time, if the partnership was a partnership at will at the time of the transfer;
(6) the passage of 90 consecutive days during which the partnership does not have at least two partners, unless either of the following applies:
(i) The remaining partner agrees in writing within 90 days after the dissociation of the last partner, to continue the business or not for profit activity of the partnership and to admit one or more new partners; or
(ii) The business or not for profit activity of the partnership is continued and one or more new partners are admitted in the manner stated in the partnership agreement; or
(7) the passage of 90 consecutive days during which the partnership does not have any remaining partners, unless either of the following applies:
(i) The holders of all of the transferable interests in the partnership agree in writing, within 90 days after the dissociation of the last partner, to continue the business or not for profit activity of the partnership and to admit two or more new partners; or
(ii) The business or not for profit activity of the partnership is continued and two or more new partners are admitted in the manner stated in the partnership agreement.
(Act 2018-125, §7.)
(a) A dissolved partnership continues its existence as a partnership but may not carry on any business or not for profit activity except as is appropriate to wind up and liquidate its business or not for profit activity, including:
(1) collecting its assets;
(2) disposing of its properties that will not be distributed in kind to persons owning transferable interests;
(3) discharging or making provisions for discharging its liabilities;
(4) distributing its remaining property in accordance with Section 10A-8A-8.09; and
(5) doing every other act necessary to wind up and liquidate its business or not for profit activity.
(b) In winding up its business or not for profit activity, a partnership may:
(1) deliver to the Secretary of State for filing a statement of dissolution setting forth:
(A) The name of the partnership;
(B) If the partnership has filed a statement of partnership, a statement of not for profit partnership, a statement of authority, or a statement of limited liability partnership, the unique identifying number or other designation as assigned by the Secretary of State;
(C) That the partnership has dissolved;
(D) The name, street address, and mailing address of the partner who will be winding up the business or not for profit activity of the partnership pursuant to Section 10A-8A-8.03(a), and if none, the name, street address, and mailing address of the person appointed pursuant to Section 10A-8A-8.03(b) or (c) to wind up the business or not for profit activity of the partnership;
(E) If the partnership has filed a statement of partnership, a statement of not for profit partnership, or a statement of limited liability partnership, the name, street address, and mailing address of the partnership’s registered agent; and
(F) Any other information the partnership deems appropriate;
(2) preserve the partnership’s business or not for profit activity as a going concern for a reasonable time;
(3) prosecute, defend, or settle actions or proceedings, whether civil, criminal, or administrative;
(4) transfer the partnership’s assets;
(5) resolve disputes by mediation or arbitration; and
(6) merge or convert in accordance with Article 9 of this chapter or Article 8 of Chapter 1.
(c) The dissolution of a partnership does not:
(1) transfer title to the partnership’s property;
(2) prevent the commencement of a proceeding by or against the partnership in its partnership name;
(3) terminate, abate, or suspend a proceeding pending by or against the partnership on the effective date of dissolution;
(4) terminate the authority of its registered agent; or
(5) abate, suspend, or otherwise alter the application of Section 10A-8A-3.06.
(d) A statement of dissolution is a filing instrument under Chapter 1.
(e) If a partnership has not filed a statement of partnership, a statement of not for profit partnership, a statement of limited liability partnership, or a statement of authority and the Secretary of State has not assigned a unique identifying number or other designation to that partnership, then the Secretary of State shall assign a unique identifying number or other designation to that partnership when that partnership delivers to the Secretary of State for filing that partnership’s statement of dissolution without the need of that partnership delivering to the Secretary of State for filing a statement of partnership, a statement of not for profit partnership, a statement of limited liability partnership, or a statement of authority.
(Act 2018-125, §7; Act 2020-73, §10; Act 2021-299, §5; Act 2025-281, §6.)
(a) If a dissolved partnership has a partner or partners that have not dissociated, that partner or those partners shall wind up the business or not for profit activity of the partnership and shall have the powers set forth in Section 10A-8A-8.04. A person whose dissociation as a partner resulted in the dissolution of the partnership may participate in the winding up as if still a partner, unless the dissociation was wrongful.
(b) If a dissolved partnership does not have a partner and no person has the right to participate in winding up under subsection (a), the personal or legal representative of the last person to have been a partner may wind up the partnership’s business or not for profit activity. If the representative does not exercise that right, a person to wind up the partnership’s business or not for profit activity may be appointed by the affirmative vote or consent of transferees owning a majority of the transferable interests at the time the consent is to be effective.
(c) A court of competent jurisdiction may order judicial supervision of the winding up of a dissolved partnership, including the appointment of a person to wind up the partnership’s business or not for profit activity:
(1) on application of a partner or any person entitled under the last sentence of subsection (a) to participate in the winding up of the dissolved partnership, if the applicant establishes good cause;
(2) on application of a transferee, if the partnership does not have a partner and within a reasonable time following the dissolution no person having the authority to wind up the business or not for profit activity of the partnership has been appointed pursuant to subsection (b);
(3) on application of a transferee, if the partnership does not have a partner and within a reasonable time following the dissolution the person appointed pursuant to subsection (b) is not winding up the business or not for profit activity of the partnership; or
(4) in connection with a proceeding under Section 10A-8A-8.01(4) or (5).
(d) A person appointed under subsection (b) or (c) is not a partner but:
(1) has the powers of a partner under Section 10A-8A-8.04 but is not liable for the debts, liabilities, and other obligations of the partnership solely by reason of having or exercising those powers or otherwise acting to wind up the business or not for profit activity of the dissolved partnership; and
(2) shall promptly deliver to the Secretary of State for filing a statement of dissolution setting forth the items listed in Section 10A-8A-8.02(b)(1) and the following:
(A) that the partnership does not have a partner;
(B) the name, street address, and mailing address of each person that has been appointed to wind up the business or not for profit activity of the partnership;
(C) that each person has been appointed pursuant to subsection (b) or (c), as applicable, to wind up the business or not for profit activity of the partnership;
(D) pursuant to this section, that each person has the powers of a partner under Section 10A-8A-8.04 but is not liable for the debts, liabilities, and other obligations of the partnership solely by reason of having or exercising those powers or otherwise acting to wind up the business or not for profit activity of the dissolved partnership; and
(E) if the partnership has filed a statement of partnership, a statement of not for profit partnership, a statement of limited liability partnership or a statement of authority, the unique identifying number or other designation as assigned by the Secretary of State.
(e) If a partnership has not filed a statement of partnership, a statement of not for profit partnership, a statement of limited liability partnership, or statement of authority and the Secretary of State has not assigned a unique identifying number or other designation to that partnership, then the Secretary of State shall assign a unique identifying number or other designation to that partnership when the person required under subsection (d) delivers to the Secretary of State for filing the statement of dissolution for that partnership, without the need to deliver to the Secretary of State for filing a statement of partnership, a statement of not for profit partnership, a statement of limited liability partnership, or a statement of authority.
(Act 2018-125, §7; Act 2025-281, §6.)
(a) After dissolution, a partnership is bound by the act of a partner or by the act of a dissociated partner acting as a partner under Section 10A-8A-8.03(a) which:
(1) is appropriate for winding up the partnership’s business or not for profit activity; or
(2) would have bound the partnership under Section 10A-8A-3.01 before dissolution, if, at the time the other party enters into the transaction, the other party does not have notice of the dissolution.
(b) Subject to subsection (a), a person dissociated as a partner binds a partnership through an act occurring after dissolution only if:
(1) at the time the other party enters into the transaction the other party does not have notice of the dissociation and reasonably believes that the person is a partner; and
(2) the act:
(A) is appropriate for winding up the partnership’s business or not for profit activity; or
(B) would have bound the partnership under Section 10A-8A-3.01 before dissolution and at the time the other party enters into the transaction the other party does not have notice of the dissolution.
(Act 2018-125, §7.)
(a) If a partner having knowledge of the dissolution causes a partnership to incur an obligation under Section 10A-8A-8.04(a) by an act that is not appropriate for winding up the partnership’s business or not for profit activity, the partner is liable:
(1) to the partnership for any damage caused to the partnership arising from the obligation; and
(2) if another partner or a person dissociated as a partner is liable for the obligation, to that other partner or person for any damage caused to that other partner or person arising from the liability.
(b) If a person dissociated as a partner causes a partnership to incur an obligation under Section 10A-8A-8.04(b), the person is liable:
(1) to the partnership for any damage caused to the partnership arising from the obligation; and
(2) if a partner or another person dissociated as a partner is liable for the obligation, to the partner or other person for any damage caused to the partner or other person arising from the liability.
(c) A person dissociated as a partner is not liable under subsection (b) if:
(1) the last sentence of Section 10A-8A-8.03(a) permits the person to participate in winding up; and
(2) the act that causes the partnership to be bound under Section 10A-8A-8.04(b) is appropriate for winding up the partnership’s business or not for profit activity.
(Act 2018-125, §7.)
(a) A dissolved partnership may dispose of any known claims against it by following the procedures described in subsection (b) at any time after the effective date of the dissolution of the partnership.
(b) A dissolved partnership may give notice of the dissolution in writing to the holder of any known claim. The notice must:
(1) identify the dissolved partnership;
(2) describe the information required to be included in a claim;
(3) provide a mailing address to which the claim is to be sent;
(4) state the deadline, which may not be fewer than 120 days from the effective date of the notice, by which the dissolved partnership must receive the claim;
(5) state that if not sooner barred, the claim will be barred if not received by the deadline; and
(6) unless the partnership has been throughout its existence a limited liability partnership, state that the barring of a claim against the partnership will also bar any corresponding claim against any partner or person dissociated as a partner which is based on Section 10A-8A-3.06.
(c) Unless sooner barred by any other statute limiting actions, a claim against a dissolved partnership is barred:
(1) if a claimant who was given notice under subsection (b) does not deliver the claim to the dissolved partnership by the deadline; or
(2) if a claimant whose claim was rejected by the dissolved partnership, does not commence a proceeding to enforce the claim within 90 days from the effective date of the rejection notice.
(d) For purposes of this section, “known claim” or “claim” includes unliquidated claims, but does not include a contingent liability that has not matured so that there is no immediate right to bring suit or a claim based on an event occurring after the effective date of dissolution.
(e) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(Act 2018-125, §7; Act 2021-299, §5.)
(a) A dissolved partnership may publish notice of its dissolution and request that persons with claims against the dissolved partnership present them in accordance with the notice.
(b) The notice authorized by subsection (a) must:
(1) be published at least one time in a newspaper of general circulation in the county in which the dissolved partnership’s principal office in this state is located, and if none, was last located;
(2) describe the information that must be included in a claim and provide a mailing address to which the claim is to be sent;
(3) state that if not sooner barred, a claim against the dissolved partnership will be barred unless a proceeding to enforce the claim is commenced within two years after the publication of the notice; and
(4) unless the partnership has been throughout its existence a limited liability partnership, state that the barring of a claim against the partnership will also bar any corresponding claim against any partner or person dissociated as a partner which is based on Section 10A-8A-3.06.
(c) If a dissolved partnership publishes a newspaper notice in accordance with subsection (b), unless sooner barred by any other statute limiting actions, the claim of each of the following claimants is barred unless the claimant commences a proceeding to enforce the claim against the dissolved partnership within two years after the publication date of the newspaper notice:
(1) a claimant who was not given notice under Section 10A-8A-8.06;
(2) a claimant whose claim was timely sent to the dissolved partnership but not acted on by the dissolved partnership; and
(3) a claimant whose claim is contingent at the effective date of the dissolution of the partnership, or is based on an event occurring after the effective date of the dissolution of the partnership.
(d) A claim that is not barred under this section, any other statute limiting actions, or Section 10A-8A-8.06 may be enforced:
(1) against a partnership, to the extent of its undistributed assets;
(2) except as provided in subsection (h), if the assets of a dissolved partnership have been distributed after dissolution, against the person or persons owning the transferable interests to the extent of that person’s proportionate share of the claim or of the assets distributed to that person after dissolution, whichever is less, but a person’s total liability for all claims under subsection (d) may not exceed the total amount of assets distributed to that person after dissolution of the partnership; or
(3) against any person liable on the claim under Sections 10A-8A-3.06, 10A-8A-7.03, and 10A-8A-8.05.
(e) A dissolved partnership that published a notice under this section may file an application with a court of competent jurisdiction for a determination of the amount and form of security to be provided for payment of claims that are contingent or have not been made known to the dissolved partnership or that are based on an event occurring after the effective date of the dissolution of the partnership but that, based on the facts known to the dissolved partnership, are reasonably estimated to arise after the effective date of the dissolution of the partnership. Provision need not be made for any claim that is or is reasonably anticipated to be barred under subsection (c).
(f) Within 10 days after the filing of the application provided for in subsection (e), notice of the proceeding shall be given by the dissolved partnership to each potential claimant as described in subsection (e).
(g) The court under subsection (e) may appoint a guardian ad litem to represent all claimants whose identities are unknown in any proceeding brought under this section. The reasonable fees and expenses of the guardian, including all reasonable expert witness fees, shall be paid by the dissolved partnership.
(h) Provision by the dissolved partnership for security in the amount and the form ordered by the court under subsection (e) shall satisfy the dissolved partnership’s obligation with respect to claims that are contingent, have not been made known to the dissolved partnership, or are based on an event occurring after the effective date of the dissolution of the partnership, and those claims may not be enforced against a person owning a transferable interest to whom assets have been distributed by the dissolved partnership after the effective date of the dissolution of the partnership.
(i) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(j) If a claim has been satisfied, disposed of, or barred under Section 10A-8A-8.06, this section, or other law, the person or persons designated to wind up the business or not for profit activity of a partnership, and the owners of the transferable interests receiving assets from the partnership, shall not be liable for that claim.
(Act 2018-125, §7; Act 2020-73, §10; Act 2021-299, §5.)
If a claim against a dissolved partnership is barred under Section 10A-8A-8.06 or 10A-8A-8.07, any corresponding claim under Sections 10A-8A-3.06, 10A-8A-7.03, and 10A-8A-8.05 is also barred.
(Act 2018-125, §7.)
Upon the winding up of a partnership, the assets of the partnership, including any obligation under Sections 10A-8A-4.03, 10A-8A-4.04, and 10A-8A-4.09, and any contribution required by this section, shall be applied as follows:
(a) Payment, or adequate provision for payment, shall be made to creditors, including, to the extent permitted by law, partners who are creditors, in satisfaction of liabilities of the partnership.
(b) After a partnership complies with subsection (a), any surplus must be distributed:
(1) first, to each person owning a transferable interest that reflects contributions made on account of the transferable interest and not previously returned, an amount equal to the value of the person’s unreturned contributions; and
(2) then to each person owning a transferable interest in the proportions in which the owners of transferable interests share in distributions before dissolution.
(c) If the partnership does not have sufficient surplus to comply with subsection (b)(1), any surplus must be distributed among the owners of transferable interests in proportion to the value of their respective unreturned contributions.
(d) If a partnership’s assets are insufficient to satisfy all of its obligations under subsection (a), with respect to each unsatisfied obligation incurred when the partnership was not a limited liability partnership, the following rules apply:
(1) Each person that was a partner when the obligation was incurred and that has not been released from the obligation under Section 10A-8A-7.03(c) and (d) shall contribute to the partnership for the purpose of enabling the partnership to satisfy the obligation. The contribution due from each of those persons is in proportion to the right to receive distributions in the capacity of partner in effect for each of those persons when the obligation was incurred.
(2) If a person does not contribute the full amount required under paragraph (1) with respect to an unsatisfied obligation of the partnership, the other persons required to contribute by paragraph (1) on account of the obligation shall contribute the additional amount necessary to discharge the obligation. The additional contribution due from each of those other persons is in proportion to the right to receive distributions in the capacity of partner in effect for each of those other persons when the obligation was incurred.
(3) If a person does not make the additional contribution required by paragraph (2), further additional contributions are determined and due in the same manner as provided in that paragraph.
(e) A person that makes an additional contribution under subsection (d)(2) or (3) may recover from any person whose failure to contribute under subsection (d)(1) or (2) necessitated the additional contribution. A person may not recover under this subsection more than the amount additionally contributed. A person’s liability under this subsection may not exceed the amount the person failed to contribute.
(f) The estate of a deceased individual is liable for the person’s obligations under this section.
(g) An assignee for the benefit of creditors of a partnership or a partner, or a person appointed by a court to represent creditors of a partnership or a partner, may enforce a person’s obligation to contribute under subsection (d).
(Act 2018-125, §7; Act 2021-299, §5.)
A partnership that has been dissolved may be reinstated upon compliance with the following conditions:
(a) the consent shall have been obtained from the partners or other persons entitled to consent at the time that is:
(1) required for reinstatement under the partnership agreement; or
(2) if the partnership agreement does not state the consent required for reinstatement, sufficient for dissolution under the partnership agreement; or
(3) if the partnership agreement neither states the consent required for reinstatement nor for dissolution, sufficient for dissolution under this chapter;
(b) in the case of a written objection to reinstatement having been delivered to the partnership before or at the time of the consent required by subsection (a) by the partners or other persons having authority under the partnership agreement to bring about or prevent dissolution of the partnership, those partners or persons withdrawing that written objection effective at the time of the consent required by subsection (a);
(c) in the case of a partnership dissolved in a judicial proceeding initiated by one or more of the partners pursuant to Section 10A-8A-8.01(4), the consent of each of those partners shall have been obtained and shall be included in the consent required by subsection (a);
(d) in the case of a partnership dissolved in a judicial proceeding initiated by one or more of transferees pursuant to Section 10A-8A-8.01(5), the consent of each of those transferees shall have been obtained and shall be included in the consent required by subsection (a); and
(e) in the case of a partnership that has filed a statement of dissolution, the filing of a certificate of reinstatement in accordance with Section 10A-8A-8.11.
(Act 2018-125, §7; Act 2021-299, §5.)
A partnership that has dissolved, has filed a statement of dissolution, and is seeking to reinstate in accordance with Section 10A-8A-8.10, shall deliver to the Secretary of State for filing a certificate of reinstatement in accordance with the following:
(a) A certificate of reinstatement shall be delivered to the Secretary of State for filing. The certificate of reinstatement shall state:
(1) the name of the partnership before reinstatement;
(2) the name of the partnership following reinstatement, which partnership name shall comply with Section 10A-8A-8.12;
(3) the date of formation of the partnership if known;
(4) the date of filing its statement of dissolution, if any, and all amendments and restatements thereof, and the office or offices where filed;
(5) if the partnership has filed a statement of partnership, a statement of not for profit partnership, a statement of authority, or a statement of limited liability partnership, the unique identifying number or other designation as assigned by the Secretary of State;
(6) the date of dissolution of the partnership, if known;
(7) a statement that all applicable conditions of Section 10A-8A-8.10 have been satisfied; and
(8) the address of the registered office and the name of the registered agent at that address in compliance with Article 5 of Chapter 1.
(b) If a partnership has not filed a statement of partnership, a statement of not for profit partnership, a statement of limited liability partnership, or a statement of dissolution and the Secretary of State has not assigned a unique identifying number or other designation to that partnership, then the Secretary of State shall assign a unique identifying number or other designation to that partnership when the partnership delivers to the Secretary of State for filing the certificate of reinstatement for that partnership, without the need to deliver to the Secretary of State for filing a statement of partnership, a statement of not for profit partnership, a statement of limited liability partnership, a statement of authority, or a statement of dissolution.
(c) A certificate of reinstatement is a filing instrument under Chapter 1.
(Act 2018-125, §7; Act 2020-73, §10; Act 2025-281, §6.)
The name of a partnership following the filing of a certificate of reinstatement shall be determined as follows:
(a) if the partnership is listed in the Secretary of State’s records as a partnership that has been dissolved, then the name of a partnership following reinstatement shall be that partnership name at the time of reinstatement if that partnership name complies with Article 5 of Chapter 1 at the time of reinstatement; and
(b) if that partnership name does not comply with Article 5 of Chapter 1, the name of the partnership following reinstatement shall be that partnership name followed by the word “reinstated.”
(Act 2018-125, §7.)
(a) Subject to subsection (b), upon reinstatement, the partnership shall be deemed for all purposes to have continued its business or not for profit activity as if dissolution had never occurred; and each right inuring to, and each debt, obligation, and liability incurred by, the partnership after the dissolution shall be determined as if the dissolution had never occurred.
(b) The rights of persons acting in reliance on the dissolution before those persons had notice of the reinstatement shall not be adversely affected by the reinstatement.
(Act 2018-125, §7.)
As used in this article, unless the context otherwise requires, the following terms mean:
(1) CONSTITUENT ORGANIZATION means an organization that is party to a merger under this article.
(2) CONSTITUENT PARTNERSHIP means a constituent organization that is a partnership.
(3) CONVERTED ORGANIZATION means the organization into which a converting organization converts pursuant to this article.
(4) CONVERTING ORGANIZATION means an organization that converts into another organization pursuant to this article.
(5) CONVERTING PARTNERSHIP means a converting organization that is a partnership.
(6) GOVERNING STATUTE of an organization means the statute that governs the organization’s internal affairs.
(7) ORGANIZATION means a partnership, including a limited liability partnership; limited partnership, including a limited liability limited partnership; limited liability company; business trust; corporation; nonprofit corporation; professional corporation; or any other person having a governing statute. The term includes domestic and foreign organizations whether or not organized for profit.
(8) ORGANIZATIONAL DOCUMENTS means:
(A)(i) for a partnership, its partnership agreement and, if applicable, its statement of partnership, statement of not for profit partnership, or statement of limited liability partnership; and (ii) for a foreign partnership, its partnership agreement and, if applicable, its statement of foreign limited liability partnership;
(B) for a limited partnership or foreign limited partnership, its certificate of formation and partnership agreement, or comparable writings as provided in its governing statute;
(C) for a limited liability company or foreign limited liability company, its certificate of formation and limited liability company agreement, or comparable writings as provided in its governing statute;
(D) for a business or statutory trust or foreign business or statutory trust its agreement of trust and declaration of trust, or comparable writings as provided in its governing statute;
(E) for a corporation for profit or foreign corporation for profit, its certificate of formation, bylaws, and other agreements among its shareholders that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(F) for a nonprofit corporation or foreign nonprofit corporation, its certificate of formation, bylaws, and other agreements that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(G) for a professional corporation or foreign professional corporation, its certificate of formation, bylaws, and other agreements among its shareholders that are authorized by its governing statute, or comparable writings as provided in its governing statute; and
(H) for any other organization, the basic writings that create the organization and determine its internal governance and the relations among the persons that own it, have an interest in it, or are members of it.
(9) PLAN OF MERGER. Except as set forth in Section 10A-8A-9.06(e), a plan of merger, whether referred to as a plan of merger, an agreement of merger, a merger agreement, a plan and agreement of merger, an agreement and plan of merger, or otherwise, means a writing described in Section 10A-8A-9.06 and includes any agreement, instrument, or other document referenced therein or associated therewith that sets forth the terms and conditions of the merger.
(10) SURVIVING ORGANIZATION means an organization into which one or more other organizations are merged under this article, whether the organization pre-existed the merger or was created pursuant to the merger.
(Act 2018-125, §7; Act 2021-299, §5; Act 2025-281, §6.)
(a) An organization other than a partnership may convert to a partnership, and a partnership may convert to an organization other than a partnership pursuant to this section, Sections 10A-8A-9.03 through 10A-8A-9.05, and a plan of conversion, if:
(1) the governing statute of the organization that is not a partnership authorizes the conversion;
(2) the law of the jurisdiction governing the converting organization and the converted organization does not prohibit the conversion; and
(3) the converting organization and the converted organization each comply with the governing statute and organizational documents applicable to that organization in effecting the conversion.
(b) A plan of conversion must be in writing and must include:
(1) the name, type of organization, and mailing address of the principal office of the converting organization, and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;
(2) the name, type of organization, and mailing address of the principal office of the converted organization after conversion;
(3) the terms and conditions of the conversion, including the manner and basis for converting interests in the converting organization into any combination of money, interests in the converted organization, and other consideration allowed in Section 10A-8A-9.02(c); and
(4) the organizational documents of the converted organization.
(c) In connection with a conversion, rights or securities of or interests in the converting organization may be exchanged for or converted into cash, property, or rights or securities of or interests in the converted organization, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, or rights or securities of or interests in another organization or may be cancelled.
(d) At the time of the approval of the plan of conversion in accordance with Section 10A-8A-9.03, the plan of conversion is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of conversion that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of conversion.
(e) If a partnership is the converting organization and that partnership does not have an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, then that partnership must, before proceeding with a conversion deliver to the Secretary of State for filing, a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership simultaneously with the delivery to the Secretary of State for filing, of a statement of conversion.
(f) If an organization is converting to a partnership, the converting organization must deliver to the Secretary of State for filing a statement of partnership, statement of not for profit partnership, or a statement of limited liability partnership in accordance with Section 10A-8A-9.04.
(Act 2018-125, §7; Act 2019-94, §2; Act 2025-281, §6.)
(a) Subject to Section 10A-8A-9.10, a plan of conversion must be consented to by all the partners of a converting partnership.
(b) Subject to Section 10A-8A-9.10 and any contractual rights, after a conversion is approved, and at any time before a filing is made under Section 10A-8A-9.04, a converting partnership may amend the plan or abandon the planned conversion:
(1) as provided in the plan; and
(2) except as prohibited by the plan, by the same consent as was required to approve the plan.
(Act 2018-125, §7.)
(a) After a plan of conversion is approved:
(1) if the converting organization is an organization formed under, or its internal affairs are governed by, the laws of this state, the converting organization shall file a statement of conversion in accordance with subsection (c), which statement of conversion must be signed in accordance with Section 10A-8A-2.03 and which must include:
(A) the name, type of organization, and mailing address of the principal office of the converting organization, and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;
(B) the date of the filing of the certificate of formation of the converting organization, if any, and all prior amendments and the filing office or offices, if any, where such is filed;
(C) a statement that the converting organization has been converted into the converted organization;
(D) the name and type of organization of the converted organization and the jurisdiction of its governing statute;
(E) the street and mailing address of the principal office of the converted organization;
(F) the date the conversion is effective under the governing statute of the converted organization;
(G) a statement that the conversion was approved as required by this chapter;
(H) a statement that the conversion was approved as required by the governing statute of the converted organization;
(I) a statement that a copy of the plan of conversion will be furnished by the converted organization, on request and without cost, to any owner of the converting organization; and
(J) if the converted organization is a foreign organization not authorized to conduct business or not for profit activity in this state, the street and mailing address of an office for the purposes of Section 10A-8A-9.05(b); and
(2) if the converted organization is a partnership, the converting organization shall deliver to the Secretary of State for filing a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership, as applicable, which statement of partnership, statement of not for profit partnership, or statement of limited liability partnership must include, in addition to the information required by Section 10A-8A-2.02 or 10A-8A-10.01, as applicable:
(A) a statement that the partnership was converted from the converting organization;
(B) the name and type of organization of the converting organization, the jurisdiction of the converting organization’s governing statute, and the converting organization’s unique identifying number or other designation as assigned by the Secretary of State, if any; and
(C) a statement that the conversion was approved in a manner that complied with the converting organization’s governing statute.
(3) if the converting organization is a partnership and that partnership does not have an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, then the converting organization must deliver to the Secretary of State for filing, a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership simultaneously with the delivery to the Secretary of State for filing, of a statement of conversion.
(b) A conversion becomes effective:
(1) if the converted organization is a partnership, when the statement of partnership, statement of not for profit partnership, or statement of limited liability partnership takes effect; and
(2) if the converted organization is not a partnership, as provided by the governing statute of the converted organization.
(c) If the converting organization is an organization formed under, or its internal affairs are governed by, the laws of this state, then the converting organization shall deliver for filing the statement of conversion required under subsection (a)(1) and the statement, if any, required under subsection (a)(3) to the Secretary of State.
(d) If the converted organization is a partnership, the converting organization shall deliver for filing a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership required under subsection (a)(2) to the Secretary of State.
(e) If the converting organization is required to deliver for filing a statement of conversion and a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership to the Secretary of State, then the converting organization shall deliver for filing the statement of conversion and the statement of partnership, statement of not for profit partnership, or statement of limited liability partnership to the Secretary of State simultaneously.
(f) After a conversion becomes effective, if the converted organization is a partnership, then, except for (I) certified copies of documents permitted to be delivered to the judge of probate for filing pursuant to subsection (h) and (II) certified copies of statements of authority, denial, and cancellations thereof permitted to be delivered to the judge of probate for filing pursuant to Sections 10A-8A-3.03 and 10A-8A-3.04, all filing instruments required to be filed under this title regarding that converted organization shall be filed with the Secretary of State.
(g) If:
(1) the converting organization is a filing entity, a partnership with an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, a foreign filing entity registered to conduct business or not for profit activity in this state or a qualified foreign limited liability partnership;
(2) the converted organization will be a filing entity, a partnership with an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, a foreign filing entity registered to conduct business or not for profit activity in this state or a qualified foreign limited liability partnership;
(3) the name of the converting organization and the converted organization are to be the same, other than words, phrases or abbreviations indicating the type of entity; and
(4) the name of the converted organization complies with Division A of Article 5 of Chapter 1 or Section 10A-1-7.07, as the case may be; then notwithstanding Division B of Article 5 of Chapter 1, no name reservation shall be required and the converted organization shall for all purposes of this title be entitled to utilize the name of the converting organization without any further action by the converting organization or the converted organization.
(h) A certified copy of any document required to be filed under this section may be filed in the real estate records in the office of the judge of probate in any county in which the converting organization owned real property, without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate shall, however, be entitled to collect a filing fee of five dollars ($5). Any such filing shall evidence chain of title, but lack of filing shall not affect the converted organization’s title to such real property.
(i) A statement of conversion is a filing instrument under Chapter 1.
(j) The filing fees for a statement of conversion shall be as set forth in Chapter 1.
(Act 2018-125, §7; Act 2019-94, §2.)
(a) When a conversion takes effect:
(1) all property and contract rights owned by the converting organization remains vested in the converted organization without transfer, reversion, or impairment and the title to any property vested by deed or otherwise in the converting organization shall not revert or be in any way impaired by reason of the conversion;
(2) all debts, obligations, or other liabilities of the converting organization continue as debts, obligations, or other liabilities of the converted organization and neither the rights of creditors, nor the liens upon the property of the converting organization shall be impaired by the conversion;
(3) an action or proceeding pending by or against the converting organization continues as if the conversion had not occurred and the name of the converted entity may, but need not, be substituted for the name of the converting entity in any pending action or proceeding;
(4) except as prohibited by law other than this chapter, all of the rights, privileges, immunities, powers, and purposes of the converting organization remain vested in the converted organization;
(5) except as otherwise provided in the plan of conversion, the terms and conditions of the plan of conversion take effect;
(6) except as otherwise agreed, for all purposes of the laws of this state, the converting organization shall not be required to wind up its business or not for profit activity or pay its liabilities and distribute its assets, and the conversion shall not be deemed to constitute a dissolution of the converting organization;
(7) for all purposes of the laws of this state, the rights, privileges, powers, interests in property, debts, liabilities and duties of the converting organization, shall be the rights, privileges, powers, interests in property, debts, liabilities and duties of the converted organization, and shall not be deemed as a consequence of the conversion, to have been transferred to the converted organization;
(8) if the converted organization is a partnership, for all purposes of the laws of this state, the partnership shall be deemed to be the same organization as the converting organization, and the conversion shall constitute a continuation of the existence of the converting organization in the form of a partnership;
(9) if the converted organization is a partnership, the existence of the partnership shall be deemed to have commenced on the date the converting organization commenced its existence in the jurisdiction in which the converting organization was first created, formed, organized, incorporated, or otherwise came into being;
(10) the conversion shall not affect the choice of law applicable to matters arising prior to conversion; and
(11) If the Secretary of State has assigned a unique identifying number or other designation to the converting organization and
(i) the converted organization is formed pursuant to, or its internal affairs are governed by, the laws of this state or
(ii) the converted organization is, within 30 days after the effective date of the conversion, registered to transact business in this state, then that unique identifying number or other designation shall continue to be assigned to the converted organization.
(b) A converted organization that is a foreign entity consents to the jurisdiction of the courts of this state to enforce any debt, obligation, or other liability for which the converting partnership is liable if, before the conversion, the converting partnership was subject to suit in this state on the debt, obligation, or other liability. If a converted organization that is a foreign entity fails to designate or maintain a registered agent, or the designated registered agent cannot with reasonable diligence be served, then service of process on that converted organization for the purposes of enforcing a debt, obligation, or other liability under this subsection may be made in the same manner and has the same consequences as provided in Section 10A-1-5.35.
(Act 2018-125, §7; Act 2019-94, §2.)
(a) A partnership may merge with one or more other constituent organizations pursuant to this section, Sections 10A-8A-9.07 through 10A-8A-9.09, and a plan of merger, if:
(1) the governing statute of each of the other organizations authorizes the merger;
(2) the merger is not prohibited by the law of a jurisdiction that enacted any of those governing statutes; and
(3) each of the other organizations complies with its governing statute in effecting the merger.
(b) A plan of merger must be in writing and must include:
(1) the name, type of organization, and mailing address of the principal office of each constituent organization, the jurisdiction of the governing statute of each constituent organization, and the respective unique identifying numbers or other designations as assigned by the Secretary of State, if any, of each constituent organization;
(2) the name, type of organization, and mailing address of the principal office of the surviving organization, the unique identifying number or other designation as assigned by the Secretary of State, if any, of the surviving organization, the jurisdiction of the governing statute of the surviving organization, and, if the surviving organization is to be created pursuant to the merger, a statement to that effect;
(3) the terms and conditions of the merger, including the manner and basis for converting the interests in each constituent organization into any combination of money, interests in the surviving organization, and other consideration as allowed by subsection (c);
(4) if the surviving organization is to be created pursuant to the merger, the surviving organization’s organizational documents; and
(5) if the surviving organization is not to be created pursuant to the merger, any amendments to be made by the merger to the surviving organization’s organizational documents.
(c) In connection with a merger, rights or securities of or interests in a constituent organization may be exchanged for or converted into cash, property, or rights or securities of or interests in the surviving organization, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, or rights or securities of or interests in another organization or may be cancelled.
(d) In addition to the requirements of subsection (b), a plan of merger may:
(1) provide that (i) a constituent organization or any other party to the plan of merger that fails to perform its obligations under the plan of merger in accordance with the terms and conditions of the plan of merger, or that otherwise fails to comply with the terms and conditions of the plan of merger, in each case, required to be performed or complied with prior to the time the merger becomes effective, or that otherwise fails to consummate, or fails to cause the consummation of, the merger (whether prior to a specified date, upon satisfaction or, to the extent permitted by law, waiver of all conditions to consummation set forth in the plan of merger, or otherwise) shall be subject, in addition to any other remedies available at law or in equity, to the penalties or consequences as are set forth in the plan of merger (which penalties or consequences may include an obligation to pay to the other party or parties to the plan of merger an amount representing, or based on the loss of, any premium or other economic entitlement the owners of the other party would be entitled to receive pursuant to the terms of the plan of merger if the merger were consummated in accordance with the terms of the plan of merger) and (ii) if, pursuant to the terms of the plan of merger, a constituent organization is entitled to receive payment from another party to the plan of merger of any amount representing a penalty or consequence (as specified in clause (i) of this Section 10A-8A-9.06(d)(1)), the constituent organization shall be entitled to enforce the other party’s payment obligation and, upon receipt of any payment, shall be entitled to retain the amount of the payment so received;
(2) provide (i) for the appointment, at or after the time at which the plan of merger is adopted by the owners of a constituent organization in accordance with the requirements of Section 10A-8A-9.07, of one or more persons (which may include the surviving or resulting entity or any officer, partner, representative, or agent thereof) as representative of the owners of a constituent organization, including those whose ownership interests shall be cancelled, converted, or exchanged in the merger, and for the delegation to that person or persons of the sole and exclusive authority to take action on behalf of the owners pursuant to the plan of merger, including taking such actions as the representative determines to enforce (including by entering into settlements with respect to) the rights of the owners under the plan of merger, on the terms and subject to the conditions set forth in the plan of merger, (ii) that any appointment pursuant to clause (i) of this Section 10A-8A-9.06(d)(2) shall be irrevocable and binding on all owners from and after the adoption of the plan of merger by the requisite vote of the partners pursuant to Section 10A-8A-9.07, and (iii) that any provision adopted pursuant to this Section 10A-8A-9.06(d)(2) may not be amended after the merger has become effective or may be amended only with the consent or approval of persons specified in the plan of merger; and
(3) contain any other provision not prohibited by law.
(e) At the time of the approval of the plan of merger in accordance with Section 10A-8A-9.07, the plan of merger is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of merger that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of merger.
(Act 2018-125, §7; Act 2019-94, §2; Act 2025-281, §6.)
(a) Subject to Section 10A-8A-9.10, a plan of merger must be consented to by all the partners of a constituent partnership.
(b) Subject to Section 10A-8A-9.10 and any contractual rights, after a merger is approved, and at any time before a filing is made under Section 10A-8A-9.08, a constituent partnership may amend the plan or abandon the merger:
(1) as provided in the plan; and
(2) except as prohibited by the plan, with the same consent as was required to approve the plan.
(Act 2018-125, §7.)
(a) After each constituent organization has approved the plan of merger, a statement of merger must be signed on behalf of:
(1) each constituent partnership, as provided in Section 10A-8A-2.03(a); and
(2) each other constituent organization, as provided by its governing statute.
(b) A statement of merger under this section must include:
(1) the name, type of organization, and mailing address of the principal office of each constituent organization, the jurisdiction of the governing statute of each constituent organization, and the respective unique identifying numbers or other designations as assigned by the Secretary of State, if any, of each constituent organization;
(2) the name, type of organization, and mailing address of the principal office of the surviving organization, the unique identifying number or other designation as assigned by the Secretary of State, if any, of the surviving organization, the jurisdiction of the governing statute of the surviving organization, and, if the surviving organization is created pursuant to the merger, a statement to that effect;
(3) the date of the filing of the statement of partnership, statement of not for profit partnership, or statement of limited liability partnership, if any, and all prior amendments and the filing office or offices, if any, and where such is filed of each constituent organization which is a partnership;
(4) the date the merger is effective under the governing statute of the surviving organization;
(5) if the surviving organization is to be created pursuant to the merger:
(A) if it will be a partnership, the partnership’s statement of partnership, statement of not for profit partnership, or statement of limited liability partnership; or
(B) if it will be an organization other than a partnership, any organizational document that creates the organization that is required to be in a public writing;
(6) if the surviving organization exists before the merger, any amendments provided for in the plan of merger for the organizational document that are required to be in a public writing;
(7) a statement as to each constituent organization that the merger was approved as required by the organization’s governing statute;
(8) a statement that a copy of the plan of merger will be furnished by the surviving organization, on request and without cost, to any owner of any constituent organization which is a party to the merger;
(9) if the surviving organization is a foreign organization not authorized to conduct business or not for profit activity in this state, the street and mailing address of an office for the purposes of Section 10A-8A-9.09(b); and
(10) any additional information required by the governing statute of any constituent organization.
(c) Prior to the statement of merger being delivered for filing to the Secretary of State in accordance with subsection (d), all constituent organizations that are partnerships, other than a partnership that is created pursuant to the merger, must have on file with the Secretary of State a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership.
(d) The statement of merger shall be delivered for filing to the Secretary of State.
(e) A merger becomes effective under this article:
(1) if the surviving organization is a partnership, upon the later of:
(A) the filing of the statement of merger with the Secretary of State; or
(B) as specified in the statement of merger; or
(2) if the surviving organization is not a partnership, as provided by the governing statute of the surviving organization.
(f) A certified copy of the statement of merger required to be filed under this section may be filed in the real estate records in the office of the judge of probate in any county in which any constituent organization owned real property, without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate, however, shall be entitled to collect the filing fee of five dollars ($5). Any such filing shall evidence chain of title, but lack of filing shall not affect the surviving organization’s title to such real property.
(g) A statement of merger is a filing instrument under Chapter 1.
(h) The filing fees for a statement of merger shall be as set forth in Chapter 1.
(Act 2018-125, §7; Act 2019-94, §2; Act 2023-503, §6.)
(a) When a merger becomes effective:
(1) the surviving organization continues or, in the case of a surviving organization created pursuant to the merger, comes into existence;
(2) each constituent organization that merges into the surviving organization ceases to exist as a separate entity;
(3) except as provided in the plan of merger, all property owned by, and every contract right possessed by, each constituent organization that ceases to exist vests in the surviving organization without transfer, reversion, or impairment and the title to any property and contract rights vested by deed or otherwise in the surviving organization shall not revert, be in any way impaired, or be deemed to be a transfer by reason of the merger;
(4) all debts, obligations, and other liabilities of each constituent organization, other than the surviving organization, are debts, obligations, and other liabilities of the surviving organization, and neither the rights of creditors, nor any liens upon the property of any constituent organization, shall be impaired by the merger;
(5) an action or proceeding pending by or against any constituent organization continues as if the merger had not occurred and the name of the surviving organization may be, but need not be, substituted in any pending proceeding for the name of any constituent organization whose separate existence ceased in the merger;
(6) except as prohibited by law other than this chapter, or as provided in the plan of merger, all of the rights, privileges, franchises, immunities, powers, and purposes of each constituent organization, other than the surviving organization, vest in the surviving organization;
(7) except as otherwise provided in the plan of merger, the terms and conditions of the plan of merger take effect;
(8) except as otherwise agreed, if a constituent partnership ceases to exist, the merger does not dissolve the partnership;
(9) if the surviving organization is created pursuant to the merger:
(A) if it is a partnership, the statement of partnership, statement of not for profit partnership or statement of limited liability partnership becomes effective; or
(B) if it is an organization other than a partnership, the organizational documents that create the organization become effective;
(10) if the surviving organization existed before the merger, any amendments provided for in the statement of merger for the organizational documents of that organization become effective;
(11) the transferable interests of each partnership that is a constituent organization to the merger, and the ownership interests of each organization that is not a partnership, but is a constituent organization to the merger, that are to be converted in accordance with the terms of the merger into transferable interests, ownership interests, other securities, obligations, rights to acquire transferable interests, ownership interests, or other securities, cash, other property, or any combination of the foregoing, are converted, and the former holder of such transferable interests or ownership interests is entitled only to the rights provided to that former holder by those terms or the statute governing that former holder’s constituent organization; and
(12) if the surviving organization exists before the merger:
(i) except as provided in the plan of merger, all the property and contract rights of the surviving organization remain its property and contract rights without transfer, reversion, or impairment;
(ii) the surviving organization remains subject to all its debts, obligations, and other liabilities; and
(iii) except as provided by law other than this chapter, or the plan of merger, the surviving organization continues to hold all of its rights, privileges, franchises, immunities, powers, and purposes.
(b) A surviving organization that is a foreign entity consents to the jurisdiction of this state to enforce any debt, obligation, or other liability owed by a constituent organization, if before the merger the constituent organization was subject to suit in this state on the debt, obligation, or other liability. If a surviving organization that is a foreign entity fails to designate or maintain a registered agent, or the designated registered agent cannot with reasonable diligence be served, then the service of process on that surviving organization for the purposes of enforcing a debt, obligation, or other liability under this subsection may be made in the same manner and has the same consequences as provided in Section 10A-1-5.35.
(Act 2018-125, §7; Act 2019-94, §2.)
(a) If a partner of a converting or constituent partnership will have personal liability with respect to a converted or surviving organization, approval and amendment of a plan of conversion or plan of merger are ineffective without that partner’s consent to the plan.
(b) A statement of cancellation of the statement of limited liability partnership filed in connection with a conversion or merger is ineffective without each partner’s written consent to such amendment.
(c) A partner does not give the consent required by subsection (a) or (b) merely by consenting to a provision of the partnership agreement that permits the partnership agreement to be amended with the consent of fewer than all the partners.
(Act 2018-125, §7.)
(a) A conversion or merger under this article does not discharge any liability under Section 10A-8A-3.06, 10A-8A-7.02, or 10A-8A-7.03 of a person that was a partner in or dissociated as a partner from a converting or constituent partnership, but:
(1) the provisions of this chapter pertaining to the collection or discharge of the liability continue to apply to the liability;
(2) for the purposes of applying those provisions, the converted or surviving organization is deemed to be the converting or constituent partnership; and
(3) if a person is required to pay any amount under this subsection:
(A) the person has a right of contribution from each other person that was liable as a partner under Section 10A-8A-3.06 when the obligation was incurred and has not been released from the obligation under Section 10A-8A-7.02 or 10A-8A-7.03; and
(B) the contribution due from each of those persons is in proportion to the right to receive distributions in the capacity of partner in effect for each of those persons when the obligation was incurred.
(b) In addition to any other liability provided by law:
(1) a person that immediately before a conversion or merger became effective was a partner in a converting or constituent partnership that was not a limited liability partnership is personally liable for each obligation of the converted or surviving organization arising from a transaction with a third party after the conversion or merger becomes effective, if, at the time the third party enters into the transaction, the third party:
(A) does not have notice of the conversion or merger; and
(B) reasonably believes that:
(i) the converted or surviving business is the converting or constituent partnership;
(ii) the converting or constituent partnership is not a limited liability partnership; and
(iii) the person is a partner in the converting or constituent partnership; and
(2) a person that was dissociated as a partner from a converting or constituent partnership before the conversion or merger became effective is personally liable for each obligation of the converted or surviving organization arising from a transaction with a third party after the conversion or merger becomes effective, if:
(A) immediately before the conversion or merger became effective the converting or surviving partnership was not a limited liability partnership; and
(B) at the time the third party enters into the transaction the third party:
(i) does not have notice of the dissociation;
(ii) does not have notice of the conversion or merger; and
(iii) reasonably believes that the converted or surviving organization is the converting or constituent partnership, the converting or constituent partnership is not a limited liability partnership, and the person is a partner in the converting or constituent partnership.
(Act 2018-125, §7.)
(a) An act of a person that immediately before a conversion or merger became effective was a partner in a converting or constituent partnership binds the converted or surviving organization after the conversion or merger becomes effective, if:
(1) before the conversion or merger became effective, the act would have bound the converting or constituent partnership under Section 10A-8A-3.01; and
(2) at the time the third party enters into the transaction, the third party:
(A) does not have notice of the conversion or merger; and
(B) reasonably believes that the converted or surviving organization is the converting or constituent partnership and that the person is a partner in the converting or constituent partnership.
(b) An act of a person that before a conversion or merger became effective was dissociated as a partner from a converting or constituent partnership binds the converted or surviving organization after the conversion or merger becomes effective, if:
(1) before the conversion or merger became effective, the act would have bound the converting or constituent partnership under Section 10A-8A-3.01 if the person had been a partner; and
(2) at the time the third party enters into the transaction, the third party:
(A) does not have notice of the dissociation;
(B) does not have notice of the conversion or merger; and
(C) reasonably believes that the converted or surviving organization is the converting or constituent partnership and that the person is a partner in the converting or constituent partnership.
(c) If a person having knowledge of the conversion or merger causes a converted or surviving organization to incur an obligation under subsection (a) or (b), the person is liable:
(1) to the converted or surviving organization for any damage caused to the organization arising from the obligation; and
(2) if another person is liable for the obligation, to that other person for any damage caused to that other person arising from the liability.
(Act 2018-125, §7.)
This article is not exclusive. This article does not preclude an entity from being converted or merged under law other than this chapter.
(Act 2018-125, §7.)
(a) A partnership may be formed as, or may become, a limited liability partnership pursuant to this section.
(b) In order to form a limited liability partnership, the original partnership agreement of the partnership shall state that the partnership is formed as a limited liability partnership, and the partnership shall deliver to the Secretary of State for filing a statement of limited liability partnership in accordance with subsection (d) of this section.
(c) In order for an existing partnership to become a limited liability partnership, the terms and conditions on which the partnership becomes a limited liability partnership must be approved by the affirmative approval necessary to amend the partnership agreement and, in the case of a partnership agreement that expressly considers obligations to contribute to the partnership, also the affirmative approval necessary to amend those provisions, and after such approval, the partnership shall deliver to the Secretary of State for filing a statement of limited liability partnership in accordance with subsection (d).
(d) A statement of limited liability partnership must contain all of the following:
(1) the name of the limited liability partnership which must comply with Article 5 of Chapter 1;
(2) the street, and mailing, if different, address of its principal office;
(3) the street and mailing address of the registered office and the name of the registered agent at that office for service of process in this state in accordance with Chapter 1;
(4) a statement that the partnership was formed as a limited liability partnership in accordance with subsection (b) or a statement that the statement of limited liability partnership was approved in accordance with subsection (c);
(5) a statement that the partnership is a limited liability partnership; and
(6) the unique identifying number or other designation, if any, as assigned to the partnership by the Secretary of State.
(e) A statement of limited liability partnership may be amended or restated from time to time in accordance with Section 10A-1-4.26.
(f) The statement of limited liability partnership shall be executed by one or more partners authorized to execute the statement of limited liability partnership.
(g) The statement of limited liability partnership shall be accompanied by a fee for the Secretary of State in the respective amounts prescribed by Section 10A-1-4.31.
(h) The Secretary of State shall file the statement of limited liability partnership of any partnership as a limited liability partnership that submits a completed statement of limited liability partnership with the required fees. The filing by the Secretary of State of a statement of limited liability partnership is conclusive evidence that the partnership has satisfied all conditions required to be a limited liability partnership.
(i) The statement of limited liability partnership is effective, and a partnership becomes a limited liability partnership, immediately on the date the statement of limited liability partnership is filed with the Secretary of State or at any later date or time specified in the statement of limited liability partnership in compliance with Article 4 of Chapter 1. The status as a limited liability partnership remains effective, regardless of changes in the partnership, and partnership continues as a limited liability partnership until a statement of cancellation is voluntarily filed in accordance with subsection (m).
(j) The fact that a statement of limited liability partnership is on file with the Secretary of State is notice that the partnership is a limited liability partnership and as notice of the facts required to be set forth in the statement of limited liability partnership.
(k) A partnership that has filed a statement of limited liability partnership as a limited liability partnership is for all purposes, except as provided in Section 10A-8A-3.06, the same entity that existed before the statement of limited liability partnership was filed and continues to be a partnership under the laws of this state subject to the limited liability partnership provisions of this chapter. If a limited liability partnership dissolves and its business or not for profit activity, or a portion of its business or not for profit activity is continued without the complete winding up of partnership’s business or not for profit activity, a partnership which is a successor to the limited liability partnership shall not be required to file a new statement of limited liability partnership.
(l) The status of the partnership as a limited liability partnership and the liability of a partner of the limited liability partnership shall not be adversely affected by error or subsequent changes in the information stated in the statement of limited liability partnership under subsection (d).
(m) The decision to file a statement of cancellation shall require the approval of all of the partners of the partnership. The statement of cancellation must be delivered for filing to the Secretary of State and must contain the following:
(1) the name of the limited liability partnership;
(2) the unique identifying number or other designation as assigned to the partnership by the Secretary of State;
(3) the street and mailing address of its principal office;
(4) the street and mailing address of its registered office and the name of the registered agent at that office for service of process in this state which the partnership was required to maintain;
(5) a statement that the statement of cancellation was approved in accordance with this subsection; and
(6) any other information that the partners determine to include.
(n) A statement of cancellation must be executed by one or more partners authorized to execute the statement of cancellation.
(o) The statement of cancellation is effective, and a partnership ceases to be a limited liability partnership, immediately on the date the statement of cancellation is delivered to the Secretary of State for filing or at any later date or time specified in the statement of cancellation in compliance with Article 4 of Chapter 1. The statement of cancellation shall not cause the dissolution of the partnership.
(p) The filing of a statement of cancellation of a limited liability partnership does not affect the limited liability of partners for debts, obligations or liabilities of the partnership which occur or were incurred prior to the filing of the statement of cancellation.
(q) A dissolved limited liability partnership shall continue its status as a limited liability partnership unless a statement of cancellation is voluntarily filed in accordance with subsection (m).
(r) The statement of limited liability partnership and the statement of cancellation are filing instruments for the purposes of Chapter 1.
(Act 2018-125, §7; Act 2025-281, §6.)
(a) A limited liability partnership shall have the power to render professional services if it complies with the rules of the licensing authority for such profession.
(b) Every individual who renders professional services as a partner or as an employee of a limited liability partnership shall be liable for any negligent or wrongful act or omission in which the individual personally participates to the same extent the individual would be liable if the individual rendered the services as a sole practitioner.
(c) Except as otherwise provided in subsection (b), the personal liability of a partner of any limited liability partnership engaged in providing professional services shall be governed by Section 10A-8A-3.06.
(d) Except as otherwise provided in subsection (b), the personal liability of a partner or employee of a foreign limited liability partnership engaged in providing professional services shall be determined under the law of the jurisdiction which governs the foreign limited liability partnership.
(e) Nothing in this article shall restrict or limit in any manner the authority or duty of a licensing authority with respect to individuals rendering a professional service within the jurisdiction of the licensing authority. Nothing in this article shall restrict or limit any law, rule, or regulation pertaining to standards of professional conduct.
(f) Nothing in this article shall limit the authority of a licensing authority to impose requirements in addition to those stated in this chapter on any limited liability partnership or foreign limited liability partnership rendering professional services within the jurisdiction of the licensing authority.
(g) A partner’s transferable interest in a limited liability partnership organized to render professional services may be voluntarily transferred only to a qualified person.
(Act 2018-125, §7; Act 2024-413, §1.)
(a) In the case of a limited liability partnership performing professional services, upon the death of a partner, upon a partner becoming a disqualified person, or upon a transferable interest being transferred by operation of law or court decree to a disqualified person, the transferable interest of the deceased partner or of the disqualified person may be transferred to a qualified person and, if not so transferred, subject to Section 10A-8A-4.09, shall be purchased by the limited liability partnership as provided in this section.
(b) If the purchase price of the transferable interest is not determined in accordance with the partnership agreement, the limited liability partnership, within six months after the death or 30 days after the disqualification or transfer, as the case may be, shall make a written offer to pay for the transferable interest a specified price deemed by the limited liability partnership to be the fair value of the transferable interest as of the date of the death, disqualification, or transfer. The offer shall be delivered to the personal representative of the estate of the deceased partner, the disqualified person, or the transferee, as the case may be, and shall be accompanied by a balance sheet of the limited liability partnership, as of the latest available date and not more than 12 months prior to the making of the offer, and a profit and loss statement of the limited liability partnership for the 12-month period ended on the date of the balance sheet.
(c) If the fair value of the transferable interest is agreed upon between the personal representative of the estate of the deceased partner, the disqualified person, or the transferee, as the case may be, and the limited liability partnership, payment therefor shall be made within 90 days, or such other period as the parties may agree. Upon payment of the agreed value, the personal representative of the estate of the deceased partner, the disqualified person, or the transferee, as the case may be, shall cease to have any interest in, or claim to, the transferable interest.
(d) If the fair value of the transferable interest is not agreed upon between the personal representative of the estate of the deceased partner, the disqualified person, or the transferee, as the case may be, and the limited liability partnership within 30 days of the delivery of the written offer, then either party may commence a civil action in the designated court, and if none, in the circuit court for the county in which the limited liability partnership’s principal office within this state is located, and if the limited liability partnership does not have a principal office within this state, then in the circuit court for the county in which the limited liability partnership’s most recent registered office is located requesting that the fair value of the transferable interest be found and determined. If the limited liability partnership does not deliver a written offer in accordance with subsection (b), then the personal representative of the estate of the deceased partner, the disqualified person, or the transferee, as the case may be, may commence a civil action in the designated court, and if none, in the circuit court for the county in which the limited liability partnership’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the limited liability partnership’s most recent registered office is located requesting that the fair value of the transferable interest be found and determined. The personal representative of the estate of the deceased partner, the disqualified person, or the transferee, as the case may be, wherever residing, shall be made a party to the proceeding as an action against that person’s transferable interest quasi in rem. Service shall be made in accordance with the rules of civil procedure. The personal representative of the estate of the deceased partner, the disqualified person, or the transferee, as the case may be, shall be entitled to a judgment against the limited liability partnership for the amount of the fair value of that person’s transferable interest as of the date of death, disqualification, or transfer. The court may order that the judgment be paid in installments and with interest and on terms as the court may determine. The court, if it so elects, may appoint one or more persons as appraisers to receive evidence and recommend a decision on the question of fair value. The appraisers shall have the power and authority as shall be specified in the order of their appointment or an amendment thereof.
(e) The judgment shall include an allowance for interest at the rate the court finds to be fair and equitable in all the circumstances, from the date of death, disqualification, or transfer.
(f)(1) The court in a proceeding commenced under subsection (d) shall determine all court costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the court costs against the limited liability partnership, except that the court may assess court costs against the personal representative of the estate of the deceased partner, the disqualified person, or the transferee, as the case may be, in amounts which the court finds equitable, to the extent the court finds the personal representative of the estate of the deceased partner, the disqualified person, or the transferee, as the case may be, acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this section.
(2) The court in a proceeding commenced under subsection (d) may also assess the expenses of the respective parties in amounts the court finds equitable:
(A) against the limited liability partnership and in favor of the personal representative of the estate of the deceased partner, the disqualified person, or the transferee, as the case may be, if the court finds the limited liability partnership did not substantially comply with the requirements of this section; or
(B) against either the limited liability partnership or the personal representative of the estate of the deceased partner, the disqualified person, or the transferee, as the case may be, in favor of the other party, if the court finds the party against whom expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by this section.
(3) For purposes of this subsection (f), expenses means reasonable expenses of any kind that are incurred in connection with a proceeding brought under subsection (d).
(g) If the purchase or transfer of the transferable interest of a deceased partner, a disqualified person, or a transferee is not completed within 12 months after the death of the deceased partner or 12 months after the disqualification or transfer, as the case may be, the limited liability partnership shall forthwith cancel the transferable interest on its books and the personal representative of the estate of the deceased partner, the disqualified person, or the transferee, as the case may be, shall have no further interest in the transferable interest other than that person’s right to payment for the transferable interest under this section.
(h) This section shall not require a limited liability partnership to purchase a transferable interest of a disqualified person if the disqualification is for less than 12 months from the date of disqualification. A limited liability partnership may require the disqualified person to sell the disqualified person’s transferable interest to the limited liability partnership upon any disqualification.
(i) Any provision of a partnership agreement regarding the purchase or transfer of a transferable interest of a limited liability partnership performing professional services shall be specifically enforceable in the courts of Alabama.
(j) Nothing in this section shall prevent or relieve a limited liability partnership from paying pension benefits or other deferred compensation for services rendered to or on behalf of a former partner as otherwise permitted by law.
(Act 2018-125, §7; Act 2020-73, §10; Act 2025-281, §6.)
(a) Beginning January 1, 2019, this chapter governs all partnerships and all foreign partnerships.
(b) With respect to a partnership formed before January 1, 2019, and governed by the laws of this state, the following rules apply:
(1) a registration of a limited liability partnership which is current and effective as of December 31, 2018, shall remain effective without further action on the part of the limited liability partnership, and a partnership having the status of a limited liability partnership, under predecessor law, shall have the status of a limited liability partnership under this chapter and to the extent such partnership has not filed a statement of limited liability partnership pursuant to this chapter, the registration or latest annual notice filed by such partnership under predecessor law shall constitute a statement of limited liability partnership filed under this chapter;
(2) a partnership’s partnership agreement existing as of December 31, 2018, shall be deemed to be that partnership’s partnership agreement under this chapter;
(3) a statement of partnership authority is deemed to be a statement of authority and each statement of partnership authority existing as of December 31, 2018, shall remain effective without further action on the part of the partnership for the remainder of the period of time authorized under predecessor law, unless earlier amended, in which case, such statement of partnership authority shall comply with Section 10A-8A-3.03;
(4) a statement of denial, statement of dissociation, and statement of dissolution existing as of December 31, 2018, shall be deemed to be a statement of denial, statement of dissociation, and statement of dissolution under this chapter respectively;
(5) a registration of a foreign limited liability partnership which is current and effective as of December 31, 2018, shall remain effective without further action on the part of the foreign limited liability partnership, and a foreign limited liability partnership having the status of a qualified foreign limited liability partnership, under predecessor law, shall have the status of a qualified foreign limited liability partnership under this chapter and to the extent such partnership has not filed a statement of foreign limited liability partnership pursuant to this chapter, the registration or latest annual notice filed by such partnership under predecessor law shall constitute a statement of foreign limited liability partnership filed under this chapter; and
(6) if a limited liability partnership or foreign limited liability partnership is using the phrase “registered limited liability partnership” or the abbreviation “RLLP” or “R.L.L.P.,” in its name as of December 31, 2018, such phrase or abbreviation shall continue to comply with Article 5 of Chapter 1 unless and until it changes or amends, by whatever means, its name on or after January 1, 2019, at which point it may only use the term “limited liability partnership” or the abbreviation “LLP” or “L.L.P.,” in its name in compliance with Article 5 of Chapter 1. No limited liability partnership which is formed or elects to become a limited liability partnership on or after January 1, 2019, and no foreign limited liability partnership which delivers to the Secretary of State for filing, a statement of foreign limited liability partnership, may use the phrase “registered limited liability partnership” or the abbreviation “RLLP” or “R.L.L.P.,” in its name.
(Act 2018-125, §7.)
If any provision of this chapter or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.
(Act 2018-125, §7.)
This chapter modifies, limits, or supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but this chapter does not modify, limit, or supersede Section 101(c) of that act or authorize electronic delivery of any of the notices described in Section 103(b) of that act.
(Act 2018-125, §7.)
This chapter takes effect January 1, 2019.
(Act 2018-125, §7.)
Effective January 1, 2019, the following parts of the Code of Alabama 1975, are repealed: Section 10A-1-7.33 and Chapter 8 of Title 10A, comprised of Sections 10A-8-1.01 to 10A-8-11.04, inclusive, as amended and in effect immediately before the effective date of this act.
(Act 2018-125, §7.)
(a) Except as provided in subsection (b), the repeal of a statute by this chapter does not affect:
(1) the operation of the statute or any action taken under it before its repeal;
(2) any ratification, right, remedy, privilege, obligation, or liability acquired, accrued, or incurred under the statute before its repeal;
(3) any violation of the statute, or any penalty, forfeiture, or punishment incurred because of the violation, before its repeal; or
(4) any proceeding, reorganization, or dissolution commenced under the statute before its repeal, and the proceeding, reorganization, or dissolution may be completed in accordance with the statute as if it had not been repealed.
(b) If a penalty or punishment imposed for violation of a statute repealed by this chapter is reduced by this chapter, the penalty or punishment if not already imposed shall be imposed in accordance with this chapter.
(Act 2018-125, §7.)
The Alabama Department of Revenue shall promulgate rules and regulations similar to those provided under Section 40-18-176, relating to Alabama S corporations, to permit the filing of annual composite income tax returns for one or more nonresident partners, who are individuals, of a partnership, limited liability partnership, or foreign limited liability partnership with an effective statement of foreign limited liability partnership on file with the Secretary of State, as well as one or more nonresident members, who are individuals, of a limited liability company or foreign limited liability company and one or more nonresident beneficiaries, who are individuals, of a business trust, organized under or recognized by the laws of this state.
(Act 2018-125, §7.)
A limited liability partnership and a foreign limited liability partnership shall be taxed as a partnership in accordance with Section 40-18-24, as amended from time to time, will file partnership returns as required by Section 40-18-28, as amended from time to time, and shall for all other tax purposes be taxed as a partnership, all being subject to the limited liability partnership and a foreign limited liability partnership maintaining its status as a partnership under federal income tax law.
(Act 2018-125, §7.)
All provisions of this chapter may be altered from time to time or repealed and all rights of partners, partnerships, and agents are subject to this reservation. Unless expressly stated to the contrary in this chapter, all amendments of this chapter shall apply to partners, partnerships, and agents whether or not existing as such at the time of the enactment of any such amendment.
(Act 2018-125, §7.)
A limited liability partnership governed by this chapter may conduct its business or not for profit activity, carry on its operations, and have and exercise the powers granted by this chapter in any state, foreign country, or other jurisdiction.
(Act 2018-125, §7.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
Reserved.
Repealed by Act 2016-379, §5, effective January 1, 2017.
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1; Act 2010-211, p. 337, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
[Repealed]
Repealed by Act 2016-379, §5, effective January 1, 2017.
(Act 2009-621, p. 1805, §1.)
This chapter and the provisions of Chapter 1, to the extent applicable to limited partnerships, shall be known and may be cited as the Alabama Limited Partnership Law.
(Act 2016-379, §1.)
As used in this chapter, unless the context otherwise requires, the following terms mean:
(1) “CERTIFICATE OF FORMATION” with respect to a limited partnership means the certificate of formation required by Section 10A-9A-2.01, and the certificate of formation as amended or restated.
(2) “DISTRIBUTION” except as otherwise provided in Section 10A-9A-5.08(f), means a transfer of money or other property from a limited partnership to another person on account of a transferable interest.
(3) “FOREIGN LIMITED LIABILITY LIMITED PARTNERSHIP” means a foreign limited partnership whose general partners have limited liability for the obligations of the foreign limited partnership under a provision similar to Section 10A-9A-4.04(c).
(4) “FOREIGN LIMITED PARTNERSHIP” means a partnership formed under the laws of a jurisdiction other than this state and required by those laws to have one or more general partners and one or more limited partners. The term includes a foreign limited liability limited partnership.
(5) “GENERAL PARTNER” means:
(A) with respect to a limited partnership, a person that:
(i) is admitted as a general partner under Section 10A-9A-4.01;
or
(ii) was a general partner in a limited partnership when the limited partnership became subject to this chapter under Section 10A-9A-11.01(a); and
(B) with respect to a foreign limited partnership, a person that has rights, powers, and obligations similar to those of a general partner in a limited partnership.
(6) “LIMITED LIABILITY LIMITED PARTNERSHIP,” except in the phrase “foreign limited liability limited partnership,” means a limited partnership whose certificate of formation states that the limited partnership is a limited liability limited partnership.
(7) “LIMITED PARTNER” means:
(A) with respect to a limited partnership, a person that:
(i) is admitted as a limited partner under Section 10A-9A-3.01; or
(ii) was a limited partner in a limited partnership when the limited partnership became subject to this chapter under Section 10A-9A-11.01(a); and
(B) with respect to a foreign limited partnership, a person that has rights, powers, and obligations similar to those of a limited partner in a limited partnership.
(8) “LIMITED PARTNERSHIP,” except in the phrases “foreign limited partnership” and “foreign limited liability limited partnership,” means an entity, having one or more general partners and one or more limited partners, which is formed under this chapter by two or more persons or becomes subject to this chapter under Article 10 or Section 10A-9A-11.01(a). The term includes a limited liability limited partnership.
(9) “PARTNER” means a limited partner or general partner.
(10) “PARTNERSHIP AGREEMENT” means any agreement (whether referred to as a partnership agreement or otherwise), written, oral or implied, of the partners as to the activities and affairs of a limited partnership. The partnership agreement includes any amendments to the partnership agreement.
(11) “PERSON DISSOCIATED AS A GENERAL PARTNER” means a person dissociated as a general partner of a limited partnership.
(12) “REQUIRED INFORMATION” means the information that a limited partnership is required to maintain under Section 10A-9A-1.11.
(13) “TRANSFER” means an assignment, conveyance, deed, bill of sale, lease, mortgage, security interest, encumbrance, gift, or transfer by operation of law.
(14) “TRANSFERABLE INTEREST” means a partner’s right to receive distributions from a limited partnership.
(15) “TRANSFEREE” means a person to which all or part of a transferable interest has been transferred, whether or not the transferor is a partner.
(Act 2016-379, p. 934, §1; Act 2021-299, §5.)
(a) A person knows a fact when the person:
(1) has actual knowledge of it; or
(2) is deemed to know it under law other than this chapter.
(b) A person has notice of a fact when the person:
(1) knows of it;
(2) receives notification of it;
(3) has reason to know the fact from all of the facts known to the person at the time in question; or
(4) is deemed to have notice of the fact under subsection (d).
(c) A person notifies or gives a notification to another person by taking steps reasonably required to inform the other person in ordinary course, whether or not the other person knows the fact.
(d) A person is deemed to have notice of a limited partnership’s:
(1) matters included in the certificate of formation under Sections 10A-9A-2.01(a)(1), (a)(2), (a)(3), (a)(4), if applicable, (a)(5), and (a)(6) upon filing;
(2) general partner dissociating as a general partner, 90 days after the effective date of an amendment to the certificate of formation which states that the general partner has dissociated or 90 days after the effective date of a statement of dissociation pertaining to the general partner, whichever occurs first;
(3) dissolution, 90 days after a statement of dissolution under Section 10A-9A-8.02 or Section 10A-9A-8.03 becomes effective;
(4) merger or conversion under Article 10 of this chapter or under Article 8 of Chapter 1, 90 days after the statement of merger or conversion becomes effective; or
(5) reinstatement, 90 days after a certificate of reinstatement under Section 10A-9A-8.11 becomes effective.
(e) A general partner’s knowledge, notice, or receipt of a notification of a fact relating to the limited partnership is effective immediately as knowledge of, notice to, or receipt of a notification by the limited partnership, except in the case of a fraud on the limited partnership committed by or with the consent of the general partner. A limited partner’s knowledge, notice, or receipt of a notification of a fact relating to the limited partnership is not effective as knowledge of, notice to, or receipt of a notification by the limited partnership solely by reason of the partner’s capacity as a limited partner.
(Act 2016-379, §1.)
(a) A limited partnership is a separate legal entity. A limited partnership’s status for tax purposes shall not affect its status as a separate legal entity formed under this chapter. A limited partnership is the same entity regardless of whether its certificate of formation states that the limited partnership is a limited liability limited partnership. A partner has no interest in any specific property of a limited partnership.
(b) A limited partnership may carry on any lawful activity, whether or not for profit, except a banking or insurance business.
(Act 2016-379, §1.)
(a) A limited partnership shall possess and may exercise all the powers and privileges granted and enumerated by Chapter 1 or by any other law or by its partnership agreement, together with any powers incidental thereto, including those powers and privileges necessary or convenient to the conduct, promotion, or attainment of the business, purposes, or activities and affairs of the limited partnership and including the power to sue, be sued, and defend in its own name and to maintain an action against a partner for harm caused to the limited partnership by a breach of the partnership agreement or violation of a duty to the partnership.
(b) A limited partnership may indemnify and hold harmless a partner or other person, pay in advance or reimburse expenses incurred by a partner or other person, and purchase and maintain insurance on behalf of a partner or other person.
(Act 2016-379, §1.)
(a) The law of this state governs:
(1) the organization and internal affairs of a limited partnership;
(2) the liability of a partner as a partner for the debts, obligations, or other liabilities of a limited partnership; and
(3) the authority of the partners of a limited partnership.
(b) The law of the state or other jurisdiction under which a foreign limited partnership is formed governs:
(1) the organization and internal affairs of a foreign limited partnership;
(2) the liability of a partner as a partner for the debts, obligations, or other liabilities of a foreign limited partnership; and
(3) the authority of the partners of a foreign limited partnership.
(Act 2016-379, §1.)
(a) It is the policy of this chapter and this state to give maximum effect to the principles of freedom of contract and to the enforceability of partnership agreements.
(b) Unless displaced by particular provisions of this chapter, the principles of law and equity supplement this chapter.
(c) If an obligation to pay interest arises under this chapter and the rate is not specified, the rate is the applicable federal rate as determined from time to time by the United States Treasury pursuant to 26 U.S.C. § 1274(d) or any successor law.
(d) The rule that statutes in derogation of the common law are to be strictly construed shall have no application to this chapter.
(e) The use of any gender shall be applicable to all genders. The captions contained in this chapter are for purposes of convenience only and shall not control or affect the construction of this chapter.
(f) Sections 7-9A-406 and 7-9A-408 of the Uniform Commercial Code, and all successor statutes thereto, do not apply to any interest in a limited partnership, including all rights, powers, and interests arising under a partnership agreement or this chapter. This provision prevails over Sections 7-9A-406 and 7-9A-408 of the Uniform Commercial Code, and all successor statutes thereto, and is expressly intended to permit the enforcement of the provisions of a partnership agreement that would otherwise be ineffective under Sections 7-9A-406 and 7-9A-408 of the Uniform Commercial Code, and all successor statutes thereto.
(g) Division E of Article 3 of Chapter 1 shall have no application to this chapter.
(h) The terms president, vice president, secretary, and treasurer, as defined in Chapter 1, shall have no application to this chapter.
(i) Section 10A-1-2.13(c) shall have no application to this chapter.
(j) Action validly taken pursuant to one provision of this chapter shall not be deemed invalid solely because it is identical or similar in substance to an action that could have been taken pursuant to some other provision of this chapter but fails to satisfy one or more requirements prescribed by such other provision.
(Act 2016-379, p. 934, §1; Act 2018-125, §6; Act 2025-281, §7.)
(a) Except as otherwise provided in subsections (b) and (c):
(1) the partnership agreement governs relations among the partners as partners and between the partners and the partnership; and
(2) to the extent the partnership agreement does not otherwise provide for a matter described in subsection (a)(1), this chapter governs the matter.
(b)(1) To the extent that, at law or in equity, a partner or other person has duties, including fiduciary duties, to a limited partnership or to another partner or to another person that is a party to or is otherwise bound by a partnership agreement, the partner’s or other person’s duties may be expanded or restricted or eliminated by provisions in a written partnership agreement, but the implied contractual covenant of good faith and fair dealing may not be eliminated.
(2) A written partnership agreement may provide for the limitation or elimination of any and all liabilities for breach of contract and breach of duties, including fiduciary duties, of a partner or other person to a limited partnership or to another partner or to another person that is a party to or is otherwise bound by a partnership agreement, but a partnership agreement may not limit or eliminate liability for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing.
(3) A partner or other person shall not be liable to a limited partnership or to another partner or to another person that is a party to or is otherwise bound by a partnership agreement for breach of fiduciary duty for the partner’s or other person’s good faith reliance on the partnership agreement.
(4) A partnership agreement may provide any of the following:
(A) a partner, dissociated partner, or transferee who fails to perform in accordance with, or to comply with the terms and conditions of, the partnership agreement shall be subject to specified penalties or specified consequences;
(B) at the time or upon the happening of events specified in the partnership agreement, a partner, dissociated partner, or transferee may be subject to specified penalties or specified consequences; and
(C) subject to Section 10A-9A-1.08(c), an act or transaction under the partnership agreement by the partnership, a partner, a dissociated partner, or a transferee is void or voidable.
(5) A penalty or consequence that may be specified under paragraph (4) of this subsection may include and take the form of reducing or eliminating the defaulting partner’s or transferee’s proportionate interest in a limited partnership, subordinating the partner’s or transferee’s transferable interest to that of non-defaulting partners or transferees, forcing a sale of that transferable interest, forfeiting the defaulting partner’s or transferee’s transferable interest, the lending by other partners or transferees of the amount necessary to meet the defaulting partner’s or transferee’s commitment, a fixing of the value of the defaulting partner’s or transferee’s transferable interest by appraisal or by formula and redemption or sale of the transferable interest at that value, or other penalty or consequence.
(6) A written partnership agreement may supersede, in whole or in part, the provisions of Division C and Division D of Article 3 of Chapter 1.
(c) A partnership agreement may not:
(1) vary the nature of the limited partnership as a separate legal entity under Section 10A-9A-1.04(a);
(2) vary a limited partnership’s power under Section 10A-9A-1.05 to sue, be sued, and defend in its own name;
(3) vary the law applicable to a limited partnership under Section 10A-9A-1.06;
(4) restrict rights under this chapter of a person other than a partner, a dissociated partner, or a transferee;
(5) vary the requirements of Section 10A-9A-2.03;
(6) vary the information required under Section 10A-9A-1.11 or unreasonably restrict the right to information under Sections 10A-9A-3.04 or 10A-9A-4.07, but the partnership agreement may impose reasonable restrictions on the availability and use of information obtained under those sections and may define appropriate remedies, including liquidated damages, for a breach of any reasonable restriction on use;
(7) vary the power of the court under Section 10A-9A-2.04;
(8) eliminate the implied contractual covenant of good faith and fair dealing as provided under Section 10A-9A-1.08(b)(1);
(9) eliminate or limit the liability of a partner or other person for any act or omission that constitutes a bad faith violation of the implied contractual covenant of good faith and fair dealing as provided under Section 10A-9A-1.08(b)(2);
(10) waive the requirements of Section 10A-9A-5.02(e);
(11) reduce the limitations period specified under Section 10A-9A-5.08(d) for an action commenced under other applicable law;
(12) waive the prohibition on issuance of a certificate of a transferable interest in bearer form under Section 10A-9A-7.02(c);
(13) vary the power of a person to dissociate as a general partner under Section 10A-9A-6.04(a) except that the partnership agreement may require that the notice under Section 10A-9A-6.03(1) be in a writing or in a specific form thereof;
(14) vary the power of a court to decree dissolution in the circumstances specified in Section 10A-9A-8.01(f);
(15) vary the requirement to wind up the partnership’s activities and affairs as specified in Section 10A-9A-8.02; or
(16) vary the rights of a partner under Section 10A-9A-10.10; or
(17) vary the provisions of Section 10A-9A-1.15(c), (d), or (e).
(Act 2016-379, p. 934, §1; Act 2024-413, §1.)
(a) A limited partnership is bound by and may enforce the partnership agreement, whether or not the limited partnership has itself manifested assent to the partnership agreement.
(b) A person that is admitted as a partner of a limited partnership becomes a party to and assents to the partnership agreement except as provided in Section 10A-9A-7.02(g).
(c) Two or more persons intending to be the initial general partner and the initial limited partner of a limited partnership may make an agreement providing that upon the formation of the limited partnership, the agreement will become the partnership agreement.
(Act 2016-379, p. 934, §1.)
(a) If a partnership agreement provides for the manner in which it may be amended, including by requiring the approval of a person who is not a party to the partnership agreement or the satisfaction of conditions, it may be amended only in that manner or as otherwise permitted by law, except that the approval of any person may be waived by that person and any conditions may be waived by all persons for whose benefit those conditions were intended.
(b) A partnership agreement may provide rights to any person, including a person who is not a party to the partnership agreement, to the extent set forth in the partnership agreement.
(c) The obligations of a limited partnership and its partners to a person in the person’s capacity as a transferee or dissociated partner are governed by the partnership agreement. A transferee and a dissociated partner are bound by the partnership agreement.
(d) If a writing that has been delivered by a limited partnership for filing in accordance with Chapter 1 and has become effective conflicts with a provision of the partnership agreement:
(1) The partnership agreement prevails as to partners, dissociated partners, and transferees; and
(2) The writing prevails as to other persons to the extent they reasonably rely on the writing.
(Act 2016-379, §1.)
A limited partnership shall maintain the following information:
(1) A current list of the full name and last known business or residential street and mailing address of each partner, separately identifying the general partners, in alphabetical order, and the limited partners, in alphabetical order.
(2) Copies of the filed certificate of formation and all amendments thereto, together with signed copies of any powers of attorney under which any certificate of formation, amendment, or restatement has been signed.
(3) Copies of any filed statement of conversion or merger.
(4) Copies of the limited partnership’s federal, state, and local income tax returns and reports, if any, for the three most recent years.
(5) Copies of the then effective partnership agreement and any amendment thereto.
(6) Copies of any financial statement of the limited partnership for the three most recent years.
(7) Copies of any writing made by the limited partnership during the past three years of any approval or consent given by or taken of any partner pursuant to this chapter or the partnership agreement.
(8) Unless contained in a partnership agreement made in a writing, a writing stating:
(A) the amount of cash, and a description and statement of the agreed value of the other benefits, contributed and agreed to be contributed by each partner;
(B) the times at which, or events on the happening of which, any additional contributions agreed to be made by each partner are to be made;
(C) for any person that is both a general partner and a limited partner, a specification of what transferable interest the person owns in each capacity; and
(D) any events upon the happening of which the limited partnership is to be dissolved and its activities and affairs wound up.
(Act 2016-379, §1.)
A partner may lend money to and transact other activities or affairs with the limited partnership and has the same rights and obligations with respect to the loan or other transaction as a person that is not a partner.
(Act 2016-379, §1.)
A person may be both a general partner and a limited partner. A person that is both a general and limited partner has the rights, powers, duties, and obligations provided by this chapter and the partnership agreement in each of those capacities. When the person acts as a general partner, the person is subject to the obligations, duties, and restrictions under this chapter and the partnership agreement for general partners. When the person acts as a limited partner, the person is subject to the obligations, duties, and restrictions under this chapter and the partnership agreement for limited partners.
(Act 2016-379, §1.)
Action requiring the consent of partners under this chapter may be taken without a meeting, and a partner may appoint a proxy to consent or otherwise act for the partner by signing a writing of appointment, either personally or by the partner’s attorney in fact.
(Act 2016-379, §1.)
(a) If a partnership agreement provides that an act or transaction is void or voidable when taken, then that act or transaction may be ratified or waived by:
(1) the partners or other persons entitled to ratify or waive that act or transaction under the partnership agreement;
(2) if the partnership agreement does not specify the approval required for the ratification or waiver, then those partners or other persons entitled to approve the amendment of the partnership agreement; or
(3) if the partnership agreement does not specify the approval required for the amendment of the partnership agreement, then all of the partners.
(b) If the void or voidable act or transaction was the issuance or transfer of any transferable interest, then for purposes of determining who may ratify or waive any act or transaction, the transferable interest purportedly issued or transferred shall be deemed not to have been issued or transferred.
(c) Any act or transaction ratified, or with respect to which the failure to comply with any requirements of the partnership agreement is waived, pursuant to this section shall be deemed validly taken at the time of the act or transaction.
(d) Upon application of the partnership, any partner, or any person claiming to be substantially and adversely affected by a ratification or waiver pursuant to this section, the designated court, and if none, the circuit court for the county in which the partnership’s principal office is located in this state, and if none in this state, in the circuit court for the county in which the partnership’s most recent registered office is located, may hear and determine the validity and effectiveness of the ratification of, or waiver with respect to, any void or voidable act or transaction effectuated pursuant to this section, and in any such application, the partnership shall be named as a party and service of the application upon the registered agent of the partnership shall be deemed to be service upon the partnership, and no other party need be joined in order for the court to adjudicate the validity and effectiveness of the ratification or waiver, and the court may make such order respecting further or other notice of the application as the court deems proper under the circumstances; provided, that nothing herein limits or affects the right to serve process in any other manner now or hereafter provided by law, and this sentence is an extension of and not a limitation upon the right otherwise existing of service of legal process upon nonresidents.
(e) The provisions of this section shall not be construed to limit the accomplishment of a ratification or waiver of a void or voidable act or transaction by other means permitted by law.
(Act 2024-413, §2.)
(a) In order to form a limited partnership, a person must deliver a certificate of formation for filing to the Secretary of State. Section 10A-1-3.05 shall not apply to this chapter. Instead, the certificate of formation shall set forth:
(1) the name of the limited partnership, which must comply with Article 5 of Chapter 1;
(2) the street address in this state, including the county, of the registered office required by Article 5 of Chapter 1;
(3) the name of the registered agent at the registered office as required by Article 5 of Chapter 1;
(4) the name and the street and mailing address of each general partner;
(5) whether the limited partnership is a limited liability limited partnership;
(6) any additional information required by Article 8 of Chapter 1 or by Article 10 of this chapter; and
(7) any other matters the partners determine to include therein which comply with Section 10A-9A-1.08.
(b) A limited partnership is formed when the certificate of formation becomes effective in accordance with Article 4 of Chapter 1.
(c) The fact that a certificate of formation has been filed and is effective in accordance with Article 4 of Chapter 1 is notice of the matters required to be included by subsections (a)(1), (a)(2), (a)(3), (a)(4), if applicable, (a)(5), and (a)(6), but is not notice of any other fact.
(d) A partnership agreement shall be entered into either before, after, or at the time of filing the certificate of formation and, whether entered into before, after, or at the time of filing, may be made effective as of the filing of the certificate of formation or at any other time or date provided in the partnership agreement.
(Act 2016-379, p. 934, §1; Act 2020-73, §10; Act 2021-299, §5; Act 2024-413, §1.)
Division B of Article 3 of Chapter 1 shall not apply to this chapter. Instead:
(a) A certificate of formation may be amended at any time.
(b) A certificate of formation may be restated with or without amendment at any time.
(c) To amend its certificate of formation, a limited partnership must deliver a certificate of amendment for filing to the Secretary of State which certificate of amendment shall state:
(1) the name of the limited partnership;
(2) the unique identifying number or other designation as assigned by the Secretary of State; and
(3) the changes the amendment makes to the certificate of formation as most recently amended or restated.
(d) Prior to a statement of dissolution being delivered to the Secretary of State for filing, a limited partnership shall promptly deliver a certificate of amendment for filing with the Secretary of State to reflect:
(1) the admission of a new general partner; or
(2) the dissociation of a person as a general partner.
(e) Prior to a statement of dissolution being delivered to the Secretary of State for filing, if a general partner knows that any information in a filed certificate of formation was inaccurate when the certificate of formation was filed or has become inaccurate due to changed circumstances and if the information is required to be set forth in a newly filed certificate of formation under this chapter, the general partner shall promptly:
(1) cause the certificate of formation to be amended; or
(2) if appropriate, deliver for filing with the Secretary of State a certificate of correction in accordance with Chapter 1.
(f) A certificate of formation may be amended at any time pursuant to this section for any other proper purpose as determined by the limited partnership. A certificate of formation may also be amended in a statement of merger pursuant to Article 8 of Chapter 1 or Article 10 of this chapter.
(g) In order to restate its certificate of formation, a limited partnership must deliver a restated certificate of formation for filing with the Secretary of State. A restated certificate of formation must:
(1) be designated as such in the heading;
(2) state the name of the limited partnership;
(3) state the unique identifying number or other designation as assigned by the Secretary of State;
(4) set forth any amendment or change effected in connection with the restatement of the certificate of formation. Any such restatement that effects an amendment shall be subject to any other provision of this chapter not inconsistent with this section, which would apply if a separate certificate of amendment were filed to effect the amendment or change;
(5) set forth the text of the restated certificate of formation; and
(6) state that the restated certificate of formation consolidates all amendments into a single document.
(h) The original certificate of formation, as theretofore amended, shall be superseded by the restated certificate of formation and thenceforth, the restated certificate of formation, including any further amendment or changes made thereby, shall be the certificate of formation of the limited partnership, but the original effective date of formation shall remain unchanged.
(i) An amended or restated certificate of formation may contain only the provisions that would be permitted at the time of the amendment if the amended or restated certificate of formation were a newly filed original certificate of formation.
(j)(1) An amendment to a certificate of formation takes effect when the filing of the certificate of amendment takes effect as provided by Article 4 of Chapter 1.
(2) An amendment to a certificate of formation does not affect:
(i) an existing cause of action in favor of or against the limited partnership for which the certificate of amendment is sought;
(ii) a pending suit to which the limited partnership is a party; or
(iii) an existing right of a person other than an existing partner.
(3) If the name of a limited partnership is changed by amendment, an action brought by or against the limited partnership in the former name of that limited partnership does not abate because of the name change.
(k)(1) A restated certificate of formation takes effect when the filing of the restated certificate of formation takes effect as provided by Article 4 of Chapter 1.
(2) On the date and time the restated certificate of formation takes effect, the original certificate of formation and each prior amendment or restatement of the certificate of formation is superseded and the restated certificate of formation is the effective certificate of formation.
(3) Subsections (j)(2) and (j)(3) apply to an amendment effected by a restated certificate of formation.
(l) A restated certificate of formation may omit any information that is not required to be in the certificate of formation under this chapter, including the name and address of the initial registered agent or registered office, if a statement of change is on file with the Secretary of State. Any omission other than the initial registered agent, shall be an amendment to the certificate of formation, which amendment must be approved in accordance with the partnership agreement, and if the partnership agreement does not state the approval required for an amendment of the certificate of formation, then the amendment must be approved by all of the partners.
(Act 2016-379, p. 934, §1; Act 2020-73, §10; Act 2021-299, §5; Act 2023-503, §7; Act 2024-413, §1.)
(a) A writing delivered to the Secretary of State for filing pursuant to this chapter must be signed as provided by this section.
(1) A limited partnership’s initial certificate of formation must be signed by all general partners listed in the certificate of formation.
(2) An amendment adding or deleting a statement that the limited partnership is a limited liability limited partnership must be signed by all general partners listed in the certificate of formation.
(3) An amendment designating as general partner a person admitted under Section 10A-9A-8.01(c) following the dissociation of a limited partnership’s last general partner must be signed by the person or persons so designated.
(4) Any other amendment must be signed by:
(A) at least one general partner; and
(B) each other person designated in the amendment as a new general partner.
(5) A restated certificate of formation must be signed by at least one general partner and, to the extent the restated certificate of formation effects a change under any other paragraph of this subsection, the restated certificate of formation must be signed in a manner that satisfies that paragraph.
(6) a statement of dissolution must be signed by all general partners or by the person or persons appointed pursuant to Section 10A-9A-8.03(b) or (c) to wind up the dissolved limited partnership’s activities and affairs.
(7) A statement of conversion must be signed by each general partner of the limited partnership.
(8) A statement of merger must be signed by each general partner of the limited partnership.
(9) Any other writing delivered on behalf of a limited partnership for filing must be signed by at least one general partner.
(10) A statement of withdrawal by a person pursuant to Section 10A-9A-3.06 must be signed by that person.
(11) A writing delivered on behalf of a foreign limited partnership to the Secretary of State for filing must be signed by at least one general partner of the foreign limited partnership.
(12) Any other writing delivered on behalf of any person for filing must be signed by that person.
(b) Any writing to be filed under this chapter may be signed by an agent, including an attorney-in-fact. Powers of attorney relating to the signing of the writing need not be delivered to the Secretary of State.
(c) Any writing which is required in this chapter to be signed by a person need not be signed by any person:
(1) who is deceased or dissolved or for whom a guardian or general conservator has been appointed, if the record so states; or
(2) who has previously delivered for filing with the Secretary of State a statement of dissociation or withdrawal.
(Act 2016-379, p. 934, §1; Act 2020-73, §10.)
(a) If a person required by this chapter to sign a writing or deliver a writing to the Secretary of State for filing under this chapter does not do so, any other person that is aggrieved by that failure may petition the designated court, and if none, the circuit court for the county in which the limited partnership’s principal office within this state is located, and if the limited partnership does not have a principal office within this state then the circuit court for the county in which the limited partnership’s most recent registered office is located, to order:
(1) the person to sign the writing;
(2) the person to deliver the writing to the Secretary of State for filing; or
(3) the Secretary of State to file the writing unsigned.
(b) If a petitioner under subsection (a) is not the limited partnership or foreign limited partnership to whom the writing pertains, the petitioner shall make the limited partnership or foreign limited partnership a party to the action. A person aggrieved under subsection (a) may seek the remedies provided in subsection (a) in a separate action against the person required to sign or deliver the writing or as a part of any other action concerning the limited partnership or foreign limited partnership in which the person required to sign or deliver the writing is made a party.
(c) A writing filed unsigned pursuant to this section is effective without being signed.
(d) A court may award reasonable expenses, including reasonable attorneys’ fees, to the party or parties who prevail, in whole or in part, with respect to any claim made under subsection (a).
(Act 2016-379, p. 934, §1; Act 2020-73, §10.)
If a writing delivered for filing under this chapter and filed under this chapter contains information which is false in any material respect and if such information is required to be set forth on a newly filed certificate of formation under this chapter, a person that suffers loss by reasonable reliance on the information may recover damages for the loss from:
(1) a person that signed the writing, or caused another to sign it on the person’s behalf, and knew the information to be false at the time the writing was signed; and
(2) a general partner that has notice that the information was false when the writing was filed or has become false because of changed circumstances, if the general partner has notice for a reasonably sufficient time before the information is relied upon to enable the general partner to effect an amendment under Section 10A-9A-2.02, file a petition pursuant to Division B of Article 5 of Chapter 1, or deliver for filing a statement of change or a statement of correction pursuant to Division C of Article 5 of Chapter 1.
(Act 2016-379, §1.)
(a) The Secretary of State, upon request and payment of the requisite fee, shall furnish to any person a certificate of existence for a limited partnership if the writings filed in the office of the Secretary of State show that the limited partnership has been formed under the laws of this state. A certificate of existence shall reflect only the information on file with the Secretary of State. To the extent writings have been delivered to the Secretary of State, the certificate of existence must state:
(1) the limited partnership’s name;
(2) that the limited partnership was formed under the laws of this state, the date of formation, and the filing office in which the certificate of formation was filed;
(3) whether a statement of dissolution of the limited partnership has been delivered to the Secretary of State for filing;
(4) whether the limited partnership has delivered to the Secretary of State for filing a certificate of reinstatement;
(5) the unique identifying number or other designation as assigned by the Secretary of State; and
(6) other facts of record in the office of the Secretary of State which may be requested by the applicant.
(b) The Secretary of State, upon request and payment of the requisite fee, shall furnish to any person a certificate of authorization for a foreign limited partnership if the writings filed in the office of the Secretary of State show that the Secretary of State has filed a certificate of authority, has not revoked the certificate of authority, and has not filed a notice of cancellation. A certificate of authorization must state:
(1) the foreign limited partnership’s name and any alternate name for use in this state under Article 5 of Chapter 1;
(2) that the foreign limited partnership is authorized to conduct activities and affairs in this state;
(3) that the Secretary of State has not revoked the foreign limited partnership’s certificate of authority;
(4) that the foreign limited partnership has not filed with the Secretary of State a certificate of withdrawal, a notice of cancellation, or otherwise terminated its certificate of authority;
(5) the unique identifying number or other designation as assigned by the Secretary of State; and
(6) other facts of record in the office of the Secretary of State which may be requested by the applicant.
(c) Subject to any qualification stated in the certificate, a certificate of existence or authorization issued by the Secretary of State may be relied upon as conclusive evidence that the limited partnership or foreign limited partnership is in existence or is authorized to transact activities and affairs in this state.
(d) The Secretary of State shall not be required to issue a certificate of existence for a limited partnership if its certificate of formation was filed prior to January 1, 2011; provided, however, that the Secretary of State shall issue a certificate of existence upon the filing by the limited partnership of a certificate of information with the Secretary of State which must comply with Section 10A-1-3.08(b).
(Act 2016-379, p. 934, §1; Act 2020-73, §10; Act 2025-281, §7.)
(a) The initial limited partner or limited partners of a limited partnership are admitted as a limited partner or limited partners upon the formation of the limited partnership.
(b) After formation, a person is admitted as a limited partner of the limited partnership:
(1) as provided in the partnership agreement;
(2) as the result of a transaction effective under Article 10 of this chapter or Article 8 of Chapter 1;
(3) with the consent of all the partners; or
(4) as provided in Section 10A-9A-8.01(d) or (e).
(c) A person may be admitted as a limited partner without:
(1) acquiring a transferable interest; or
(2) making or being obligated to make a contribution to the limited partnership.
(Act 2016-379, §1.)
A limited partner does not have the right or the power as a limited partner to act for or bind the limited partnership.
(Act 2016-379, §1.)
A debt, obligation, or other liability of a limited partnership, whether arising in contract, tort, or otherwise, is not the debt, obligation, or other liability of a limited partner. A limited partner is not personally liable, directly or indirectly, by way of contribution or otherwise, for a debt, obligation, or other liability of the limited partnership solely by reason of being a limited partner, even if the limited partner participates in the management and control of the limited partnership.
(Act 2016-379, §1.)
(a) Subject to subsection (g), on 10 days’ demand, made in a writing received by the limited partnership, a limited partner may, for a proper purpose, inspect and copy the information required to be maintained under Section 10A-9A-1.11 during regular business hours and at a reasonable location specified by the limited partnership.
(b) Subject to subsection (g), during regular business hours and at a reasonable location specified by the limited partnership, a limited partner may, for a proper purpose, obtain from the limited partnership and inspect and copy true and full information regarding the state of the activities and affairs and financial condition of the limited partnership and other information regarding the activities and affairs of the limited partnership if:
(1) the limited partner seeks the information for a proper purpose directly related to the partner’s interest as a limited partner;
(2) the limited partner makes a demand in a writing received by the limited partnership, describing with reasonable particularity the information sought and the stated purpose for seeking the information; and
(3) the information sought is directly connected to the limited partner’s stated purpose.
(c) Within 10 days after receiving a demand pursuant to subsection (b), the limited partnership in a writing shall inform the limited partner that made the demand:
(1) what information the limited partnership will provide in response to the demand;
(2) when and where the limited partnership will provide the information;
(3) if the limited partnership declines to provide any demanded information, the limited partnership’s reasons for declining; and
(4) what, if any, restrictions will be imposed pursuant to the partnership agreement or subsection (g).
(d) Subject to subsections (f) and (g), a person dissociated as a limited partner may, for a proper purpose, inspect and copy the information required to be maintained under Section 10A-9A-1.11 during regular business hours and at a reasonable location specified by the limited partnership if:
(1) the required information pertains to the period during which the person was a limited partner;
(2) the person seeks the required information in good faith and for a proper purpose; and
(3) the person meets the requirements of subsection (b).
(e) The limited partnership shall respond to a demand made pursuant to subsection (d) in the same manner as provided in subsection (c).
(f) If a limited partner dies, Section 10A-9A-7.04 applies.
(g) In addition to any restriction or condition stated in its limited partnership agreement, a limited partnership, as a matter within the ordinary course of its activities and affairs, may:
(1) impose reasonable restrictions and conditions on access to and use of information to be furnished under this section, including designating information confidential and imposing nondisclosure and safeguarding obligations on the recipient;
(2) keep confidential from the partners and any other person, for such period of time as the limited partnership deems reasonable, any information that the limited partnership reasonably believes to be in the nature of trade secrets or other information that disclosure of which the limited partnership in good faith believes is not in the best interest of the limited partnership or could damage the limited partnership or its activities and affairs, or that the limited partnership is required by law or by agreement with a third party to keep confidential; and
(3) redact portions of the records to be inspected and copied to the extent the portions so redacted are not directly related to the limited partner’s or other person’s purpose.
In a dispute concerning the reasonableness of a restriction under this subsection, the limited partnership has the burden of proving reasonableness.
(h) A limited partnership may charge a person that makes a demand under this section the reasonable costs of copying, limited to the costs of labor and material.
(i) A limited partner or person dissociated as a limited partner may exercise the rights under this section through an attorney or other agent. Any restriction imposed under subsection (g) or by the partnership agreement applies both to the attorney or other agent and to the limited partner or person dissociated as a limited partner. If the demanding person’s agent or attorney is to inspect and copy the books and records of the limited partnership, the demand shall be accompanied by a power of attorney or other writing which authorizes the agent or attorney to so act on behalf of the demanding person.
(j) The rights stated in this section do not extend to a person as transferee, but may be exercised by the legal representative of an individual under legal disability who is a limited partner or person dissociated as a limited partner.
(k) The rights under this section may be denied by the limited partnership if the limited partnership determines that the demanding person has within two years preceding his, her, or its demand improperly used any information secured through any prior examination of the records of the limited partnership.
(l) For purposes of this section, a proper purpose shall mean a purpose directly related to the limited partner or dissociated limited partner’s interest as a limited partner or dissociated limited partner, as the case may be; provided, however, that a demand shall not be for a proper purpose if the limited partnership reasonably determines that the demand is in connection with:
(1) an active or pending derivative proceeding in the right of the limited partnership under Article 9 of this chapter that is or is expected to be instituted or maintained by the limited partner or the limited partner’s affiliate; or
(2) an active or pending civil lawsuit to which the limited partnership, or its affiliate, and the limited partner or dissociated limited partner, or the affiliate thereof, are, or are expected to be, adversarial named parties.
(m) If a limited partnership does not within a reasonable time allow a person who complies with the requirements of this section to inspect and copy the records required by this section, the person who complies with this section may apply to the designated court, and if none, the circuit court for the county in which the limited partnership’s principal office is located in this state, and if none in this state, the circuit court for the county in which the limited partnership’s most recent registered office is located for an order to permit inspection and copying of the records demanded. The court shall dispose of an application under this subsection on an expedited basis. If the court orders inspection and copying of the records demanded under this section, it may impose reasonable restrictions on their confidentiality, use, or distribution by the demanding person and the court shall also order the limited partnership to pay the demanding person’s expenses incurred to obtain the order unless the limited partnership establishes that the limited partnership refused inspection in good faith because the limited partnership had:
(1) a reasonable basis for doubt about the right of the demanding person to inspect the records demanded; or
(2) required reasonable restrictions on the confidentiality, use, or distribution of the records demanded to which the demanding person had been unwilling to agree. If the limited partnership has declined to deliver or make available the records because the demanding person had been unwilling to agree to restrictions proposed by the limited partnership on the confidentiality, use, or distribution of the records, the limited partnership shall have the burden of demonstrating that the restrictions proposed by the limited partnership were reasonable.
(Act 2016-379, §1; Act 2026-495, §1.)
(a) Except as otherwise provided in subsection (b), a limited partner does not have any duty to the limited partnership or to any other partner solely by reason of being a limited partner.
(b) A limited partner shall discharge the duties to the limited partnership and the other partners under the partnership agreement and exercise any rights under this chapter or the partnership agreement consistently with the implied contractual covenant of good faith and fair dealing.
(c) A limited partner does not violate a duty or obligation under this chapter or under the partnership agreement merely because the limited partner’s conduct furthers the limited partner’s own interest.
(Act 2016-379, §1.)
(a) Except as otherwise provided in subsection (b), a person that makes an investment in an organization and erroneously but in good faith believes that the person has become a limited partner in the organization is not liable for the organization’s obligations by reason of making the investment, receiving distributions from the organization, or exercising any rights of or appropriate to a limited partner, if, on ascertaining the mistake, the person:
(1) causes an appropriate certificate of formation, amendment, or statement of correction to be signed and filed with the filing officer in accordance with Article 4 of Chapter 1; or
(2) withdraws from future participation as an owner in the organization by signing a statement of withdrawal and filing it with the Secretary of State.
(b) A person that makes an investment described in subsection (a) is liable to the same extent as a general partner to any third party that enters into a transaction with the organization, believing in good faith that the person is a general partner, before the statement of withdrawal, certificate of formation, amendment, or statement of correction to show that the person is not a general partner is filed with the filing officer in accordance with Article 4 of Chapter 1.
(c) If a person makes a diligent effort in good faith to comply with subsection (a)(1) and is unable to cause the appropriate certificate of formation, amendment, or statement of correction to be signed and filed with the filing officer in accordance with Article 4 of Chapter 1, the person has the right to withdraw from the organization pursuant to subsection (a)(2) even if the withdrawal would otherwise breach an agreement with others that are or have agreed to become co-owners of the organization.
(Act 2016-379, §1.)
(a) Upon formation of a limited partnership, a person is admitted as a general partner as agreed among the persons that are to be the initial partners.
(b) After formation of a limited partnership, a person is admitted as a general partner:
(1) as provided in the partnership agreement;
(2) as the result of a transaction effective under Article 10 of this chapter or Article 8 of Chapter 1;
(3) with the consent of all the partners; or
(4) as provided in Section 10A-9A-8.01(c) or (e).
(c) A person may be admitted as a general partner without:
(1) acquiring a transferable interest; or
(2) making or being obligated to make a contribution to the partnership.
(Act 2016-379, §1.)
(a) Each general partner is an agent of the limited partnership for the purposes of its activities and affairs. An act of a general partner, including the signing of a writing in the partnership’s name, for apparently carrying on in the ordinary course the limited partnership’s activities and affairs or activities and affairs of the kind carried on by the limited partnership binds the limited partnership, unless the general partner did not have authority to act for the limited partnership in the particular matter and the person with which the general partner was dealing knew, had received a notification, or had notice under Section 10A-9A-1.03(d) that the general partner lacked authority.
(b) An act of a general partner which is not apparently for carrying on in the ordinary course the limited partnership’s activities and affairs or activities and affairs of the kind carried on by the limited partnership binds the limited partnership only if the act was actually authorized by all the other partners.
(Act 2016-379, §1.)
(a) A limited partnership is liable for loss or injury caused to a person, or for a penalty incurred, as a result of a wrongful act or omission, or other actionable conduct, of a general partner acting in the ordinary course of activities and affairs of the limited partnership or with authority of the limited partnership.
(b) If, in the course of the limited partnership’s activities and affairs or while acting with authority of the limited partnership, a general partner receives or causes the limited partnership to receive money or property of a person not a partner, and the money or property is misapplied by a general partner, the limited partnership is liable for the loss.
(Act 2016-379, §1.)
(a) Except as otherwise provided in subsections (b) and (c), all general partners are liable jointly and severally for all debts, obligations, and liabilities of the limited partnership unless otherwise agreed by the claimant or provided by law.
(b) A person that becomes a general partner of an existing limited partnership is not personally liable for any debt, obligation, or liability of a limited partnership incurred before the person became a general partner.
(c) A debt, obligation, or liability of a limited partnership incurred while the limited partnership is a limited liability limited partnership, whether arising in contract, tort, or otherwise, is solely the debt, obligation, or liability of the limited partnership. A general partner of a limited liability limited partnership is not personally liable, directly or indirectly, by way of indemnification, contribution, assessment or otherwise, for such a debt, obligation, or liability solely by reason of being or acting, or omitting to act, as a general partner. This subsection applies despite anything inconsistent in the partnership agreement that existed immediately before the consent required to become a limited liability limited partnership under Section 10A-9A-4.06(b)(2).
(Act 2016-379, §1.)
(a) To the extent not inconsistent with Section 10A-9A-4.04, a general partner may be joined in an action against the limited partnership or named in a separate action.
(b) A judgment against a limited partnership is not by itself a judgment against a general partner. A judgment against a limited partnership may not be satisfied from a general partner’s assets unless there is also a judgment against the general partner.
(c) A judgment creditor of a general partner may not levy execution against the assets of the general partner to satisfy a judgment based on a claim against the limited partnership, unless the partner is personally liable for the claim under Section 10A-9A-4.04 and either:
(1) a judgment based on the same claim has been obtained against the limited partnership and a writ of execution on the judgment has been returned unsatisfied in whole or in part;
(2) the limited partnership is a debtor in bankruptcy;
(3) the general partner has agreed that the creditor need not exhaust limited partnership assets;
(4) a court grants permission to the judgment creditor to levy execution against the assets of a general partner based on a finding that limited partnership assets subject to execution are clearly insufficient to satisfy the judgment, that exhaustion of limited partnership assets is excessively burdensome, or that the grant of permission is an appropriate exercise of the court’s equitable powers; or
(5) liability is imposed on the general partner by law or contract independent of the existence of the limited partnership.
(Act 2016-379, §1.)
(a) Each general partner has equal rights in the management and conduct of the limited partnership’s activities and affairs. Except as expressly provided in this chapter, any matter relating to the activities and affairs of the limited partnership is decided exclusively by the general partner or, if there is more than one general partner, by a majority of the general partners.
(b) The consent of all of the partners is necessary to:
(1) amend the partnership agreement;
(2) amend the certificate of formation to add or delete a statement that the limited partnership is a limited liability limited partnership; and
(3) sell, lease, exchange, or otherwise dispose of all, or substantially all, of the limited partnership’s property, with or without the good will, other than in the usual and regular course of the limited partnership’s activities and affairs.
(c) A limited partnership shall reimburse a general partner for payments made and indemnify a general partner for liabilities incurred by the general partner in the ordinary course of the activities and affairs of the limited partnership or for the preservation of its activities and affairs or its property.
(d) A limited partnership shall reimburse a general partner for an advance to the limited partnership beyond the amount of capital the general partner agreed to contribute.
(e) A payment or advance made by a general partner which gives rise to an obligation of the limited partnership under subsection (c) or (d) constitutes a loan to the limited partnership which accrues interest from the date of the payment or advance.
(f) A general partner is not entitled to remuneration for services performed for the partnership.
(g) A limited partnership may indemnify and hold harmless a partner or other person, pay in advance or reimburse expenses incurred by a partner or other person, and purchase and maintain insurance on behalf of a partner or other person.
(Act 2016-379, p. 934, §1; Act 2021-299, §5.)
(a) Subject to subsection (f), a general partner, without having any particular purpose for seeking the information, may inspect and copy during regular business hours at a reasonable location specified by the limited partnership, required information and any other records maintained by the limited partnership regarding the limited partnership’s activities and affairs and financial condition.
(b) Subject to subsection (f), each general partner and the limited partnership shall furnish to a general partner:
(1) without demand, any information concerning the limited partnership’s activities and affairs and activities and affairs reasonably required for the proper exercise of the general partner’s rights and duties under the partnership agreement or this chapter; and
(2) on demand, any other information concerning the limited partnership’s activities and affairs, except to the extent the demand or the information demanded is unreasonable or otherwise improper under the circumstances.
(c) Subject to subsections (e) and (f), on 10 days’ demand made in a writing received by the limited partnership, a person dissociated as a general partner may have access to the information and records described in subsection (a) at the location specified in subsection (a) if:
(1) the information or writing pertains to the period during which the person was a general partner;
(2) the person seeks the information or record in good faith; and
(3) the person satisfies the requirements imposed on a limited partner by Section 10A-9A-3.04(b).
(d) The limited partnership shall respond to a demand made pursuant to subsection (c) in the same manner as provided in Section 10A-9A-3.04(c).
(e) If a general partner dies, Section 10A-9A-7.04 applies.
(f) In addition to any restriction or condition stated in its limited partnership agreement, a limited partnership, as to a matter within the ordinary course of its activities and affairs, may:
(1) impose reasonable restrictions and conditions on access to and use of information to be furnished under this section, including designating information confidential and imposing nondisclosure and safeguarding obligations on the recipient; and
(2) keep confidential from the partners and any other person, for such period of time as the limited partnership deems reasonable, any information that the limited partnership reasonably believes to be in the nature of trade secrets or other information the disclosure of which the limited partnership in good faith believes is not in the best interest of the limited partnership or could damage the limited partnership or its activities and affairs, or that the limited partnership is required by law or by agreement with a third party to keep confidential.
In any dispute concerning the reasonableness of a restriction under this subsection, the limited partnership has the burden of proving reasonableness.
(g) A limited partnership may charge a person that makes a demand under this section reasonable costs of copying, limited to the costs of labor and material.
(h) A general partner or person dissociated as a general partner may exercise the rights under this section through an attorney or other agent. Any restriction imposed under subsection (f) or by the partnership agreement applies both to the attorney or other agent and to the general partner or person dissociated as a general partner.
(i) The rights under this section do not extend to a person as transferee, but the rights under subsection (c) of a person dissociated as a general partner may be exercised by the legal representative of an individual who dissociated as a general partner under Section 10A-9A-6.03(6).
(j) Any general partner who, without reasonable cause, refuses to allow any general partner or person dissociated as a general partner, or their agent or attorney to inspect or copy any records of the limited partnership to which such general partner or person disassociated as a general partner is entitled under this section, shall be personally liable to the general partner or person dissociated as a general partner for a penalty in an amount not to exceed 10 percent of the fair market value of the partnership interest of the general partner or person dissociated as a general partner, in addition to any other damages or remedy.
(Act 2016-379, p. 934, §1; Act 2021-299, §5.)
(a) The duties that a general partner has to the limited partnership and to the other partners include the duty of loyalty and the duty of care as described in subsections (b) and (c).
(b) A general partner’s duty of loyalty to the limited partnership and to the other partners includes each of the following:
(1) to account to the limited partnership and to hold as trustee for it any property, profit, or benefit derived by the general partner in the conduct or winding up of the limited partnership’s activities and affairs or derived from a use by the general partner of limited partnership property, including the appropriation of a limited partnership opportunity;
(2) to refrain from dealing with the limited partnership in the conduct or winding up of the limited partnership’s activities and affairs as or on behalf of a party having an interest adverse to the limited partnership; and
(3) to refrain from competing with the limited partnership in the conduct or winding up of the limited partnership’s activities and affairs.
(c) A general partner’s duty of care to the limited partnership and to the other partners in the conduct or winding up of the limited partnership’s activities and affairs includes refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.
(d) A general partner shall discharge the duties to the limited partnership and to the other partners under this chapter and under the partnership agreement and exercise any rights consistently with the implied contractual covenant of good faith and fair dealing.
(e) A general partner does not violate a duty or obligation under this chapter or under the partnership agreement merely because the general partner’s conduct furthers the general partner’s own interest.
(Act 2016-379, §1.)
A general partner of a limited partnership shall be fully protected in relying in good faith upon the records of the limited partnership and upon information, opinions, reports, or statements presented by another general partner or agent of the limited partnership, or by any other person as to matters the general partner reasonably believes are within that other person’s professional or expert competence, including information, opinions, reports, or statements as to the value and amount of the assets, liabilities, profits, or losses of the limited partnership, or the value and amount of assets or reserves or contracts, agreements, or other undertakings that would be sufficient to pay claims and obligations of the limited partnership, or to make reasonable provision to pay those claims and obligations, or any other facts pertinent to the existence and amount of assets from which distributions to partners or creditors might properly be paid.
(Act 2016-379, §1.)
A contribution by a partner may be made to a limited partnership as agreed by the partners.
(Act 2016-379, §1.)
(a) A partner’s obligation to make a contribution to a limited partnership is not excused by the partner’s death, disability, or other inability to perform personally.
(b) If a partner does not make a contribution required by an enforceable promise, the partner or the partner’s estate is obligated, at the election of the limited partnership, to contribute money equal to the value of the portion of the contribution that has not been made. The foregoing election shall be in addition to, and not in lieu of, any other rights, including the right to specific performance, that the limited partnership may have under the partnership agreement or applicable law.
(c) The obligation of a partner to make a contribution to a limited partnership may be compromised only by consent of all partners. A conditional obligation of a partner to make a contribution to a limited partnership may not be enforced unless the conditions of the obligation have been satisfied or waived as to or by that partner. Conditional obligations include contributions payable upon a discretionary call of a limited partnership before the time the call occurs.
(d) A creditor of a limited partnership which extends credit or otherwise acts in reliance on an obligation described in subsection (a), without notice of any compromise under this subsection, may enforce the original obligation.
(e) A promise by a partner to make a contribution to a limited partnership is not enforceable unless set forth in a writing signed by the partner.
(Act 2016-379, §1.)
All partners shall share equally in any distributions made by a limited partnership before its dissolution and winding up.
(Act 2016-379, §1.)
A partner has a right to a distribution before the dissolution and winding up of a limited partnership as provided in the partnership agreement. A decision to make a distribution before the dissolution and winding up of the limited partnership is a decision in the ordinary course of the activities and affairs of the limited partnership.
(Act 2016-379, §1.)
A partner’s dissociation does not entitle the dissociated partner to a distribution.
(Act 2016-379, §1.)
A partner does not have a right to demand and receive a distribution from a limited partnership in any form other than money. Except as otherwise provided in Section 10A-9A-8.09(c), a limited partnership may distribute an asset in kind if each partner receives a percentage of the asset in proportion to the partner’s share of distributions.
(Act 2016-379, §1.)
If a partner becomes entitled to receive a distribution, the partner has the status of, and is entitled to all remedies available to, a creditor of the limited partnership with respect to the distribution. However, the limited partnership’s obligation to make a distribution is subject to offset for any amount owed to the limited partnership by the partner or dissociated partner on whose account the distribution is made.
(Act 2016-379, §1.)
(a) A limited partnership shall not make a distribution to a partner to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of the limited partnership, other than liabilities to partners on account of their transferable interests and liabilities for which the recourse of creditors is limited to specific property of the limited partnership, exceed the fair value of the assets of the limited partnership, except that the fair value of the property that is subject to a liability for which recourse of creditors is limited shall be included in the assets of the limited liability partnership only to the extent that the fair value of the property exceeds that liability.
(b) A general partner who consents to a distribution in violation of subsection (a) or the partnership agreement, and who knew at the time of the distribution that the distribution violated subsection (a) or the partnership agreement, shall be liable to the limited partnership for the amount of that distribution.
(c) A limited partner who receives a distribution in violation of subsection (a) or the partnership agreement, and who knew at the time of the distribution that the distribution violated subsection (a) or the partnership agreement, shall be liable to the limited partnership for the amount of the distribution received by that partner. A limited partner who receives a distribution in violation of subsection (a) or the partnership agreement, and who did not know at the time of the distribution that the distribution violated subsection (a) or the partnership agreement, shall not be liable for the amount of the distribution received by that partner.
(d) Except as provided in subsection (e), this section shall not affect any obligation or liability of a partner under other applicable law for the amount of a distribution.
(e) An action under this section or other applicable law is barred if not commenced within two years after the distribution.
(f) For purposes of subsection (a), “distribution” does not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of the limited partnership’s activities and affairs under a bona fide retirement plan or other benefits program.
(g) This section shall not apply to distributions made in accordance with Section 10A-9A-8.09.
(Act 2016-379, §1.)
(a) A person does not have a right to dissociate as a limited partner before the dissolution and winding up of the limited partnership.
(b) A person is dissociated from a limited partnership as a limited partner upon the occurrence of any of the following events:
(1) an event stated in the partnership agreement as causing the person’s dissociation as a limited partner;
(2) the person is expelled as a limited partner pursuant to the partnership agreement;
(3) the person is expelled as a limited partner by the unanimous consent of the other partners if:
(A) it is unlawful to carry on the limited partnership’s activities and affairs with the person as a limited partner;
(B) there has been a transfer of all of the person’s transferable interest in the limited partnership, other than a transfer for security purposes;
(C) the person is an organization and, within 90 days after the limited partnership notifies the person that it will be expelled as a limited partner because it has filed a statement of dissolution or the equivalent, or its right to conduct activities and affairs has been suspended by its jurisdiction of formation, the statement of dissolution or the equivalent has not been revoked or its right to conduct activities and affairs has not been reinstated; or
(D) the person is an organization and, within 90 days after the limited partnership notifies the person that it will be expelled as a limited partner because the person has been dissolved and its activities and affairs are being wound up, the organization has not been reinstated or the dissolution and winding up have not been revoked or cancelled;
(4) on application by the limited partnership, the person is expelled as a limited partner by judicial order because the person:
(A) has engaged, or is engaging, in wrongful conduct that has adversely and materially affected, or will adversely and materially affect, the limited partnership’s activities and affairs;
(B) has willfully or persistently committed, or is willfully or persistently committing, a material breach of the partnership agreement or the person’s duty or obligation under this chapter or other applicable law; or
(C) has engaged, or is engaging, in conduct relating to the activities and affairs of the limited partnership that makes it not reasonably practicable to carry on the activities and affairs with the person as limited partner;
(5) in the case of a person who is an individual, the person dies, there is appointed a guardian or general conservator for the person or there is a judicial determination that the person has otherwise become incapable of performing the person’s duties as a limited partner under this chapter or the partnership agreement;
(6) the person becomes a debtor in bankruptcy, executes an assignment for the benefit of creditors, or seeks, consents, or acquiesces to the appointment of a trustee, receiver, or liquidator of the person or of all or substantially all of the person’s property, but this subsection (6) shall not apply to a person who is the sole remaining limited partner of the limited partnership;
(7) in the case of a person that is a trust or is acting as a limited partner by virtue of being a trustee of a trust, the trust’s entire transferable interest in the limited partnership is distributed, but not solely by reason of the substitution of a successor trustee;
(8) in the case of a person that is an estate or is acting as a limited partner by virtue of being a personal representative of an estate, the estate’s entire transferable interest in the limited partnership is distributed, but not solely by reason of the substitution of a successor personal representative;
(9) in the case of a person that is not an individual, the legal existence of the person otherwise terminates;
(10) the transfer of a limited partner’s entire remaining transferable interest to another partner;
(11) the transfer of a limited partner’s entire remaining transferable interest to a transferee upon the transferee’s becoming a partner; or
(12) the limited partnership’s participation in a conversion or merger under Article 10 of this chapter or Article 8 of Chapter 1 if the limited partnership:
(A) is not the converted or surviving entity; or
(B) is the converted or surviving entity but, as a result of the conversion or merger, the person ceases to be a limited partner.
(Act 2016-379, §1.)
(a) Upon a person’s dissociation as a limited partner:
(1) subject to Section 10A-9A-7.04, the person does not have further rights as a limited partner;
(2) the person’s implied contractual covenant of good faith and fair dealing as a limited partner under Section 10A-9A-3.05(b) continues only as to matters arising and events occurring before the dissociation; and
(3) subject to Section 10A-9A-7.04, and Article 10 of this chapter and Article 8 of Chapter 1, any transferable interest owned by the person in the person’s capacity as a limited partner immediately before dissociation is owned by the person immediately after dissociation as a mere transferee.
(b) A person’s dissociation as a limited partner does not of itself discharge the person from any duty, debt, obligation, or liability to the limited partnership or the other partners that the person incurred while a limited partner.
(Act 2016-379, §1.)
A person is dissociated from a limited partnership as a general partner when any of the following occurs:
(1) the limited partnership has notice of the person’s express will to dissociate as a general partner, except that if the person specifies a dissociation date later than the date the limited partnership had notice, then the person is dissociated as a general partner on that later date;
(2) an event stated in the partnership agreement as causing the person’s dissociation as a general partner occurs;
(3) the person is expelled as a general partner pursuant to the partnership agreement;
(4) the person is expelled as a general partner by the unanimous consent of the other partners if:
(A) it is unlawful to carry on the limited partnership’s activities and affairs with the person as a general partner;
(B) there has been a transfer of all of the person’s transferable interest in the limited partnership, other than a transfer for security purposes;
(C) the person is an organization and, within 90 days after the limited partnership notifies the person that it will be expelled as a general partner because it has filed a statement of dissolution or the equivalent, or its right to conduct activities and affairs has been suspended by its jurisdiction of formation, the statement of dissolution or the equivalent has not been revoked or its right to conduct activities and affairs has not been reinstated; or
(D) the person is a limited liability company or partnership that has been dissolved and whose activities and affairs are being wound up;
(5) on application by the limited partnership, or a partner in a direct action under Section 10A-9A-9.01, the person’s expulsion as a general partner by judicial order because the person:
(A) has engaged, or is engaging, in wrongful conduct that adversely and materially affected, or will adversely and materially affect, the limited partnership’s activities and affairs;
(B) has willfully or persistently committed, or is willfully or persistently committing, a material breach of the partnership agreement or the person’s duty or obligation under this chapter or other applicable law; or
(C) has engaged, or is engaging, in conduct relating to the limited partnership’s activities and affairs which makes it not reasonably practicable to carry on the activities and affairs with the person as a general partner;
(6) in the case of a person who is an individual, the person dies, there is appointed a guardian or general conservator for the person or there is a judicial determination that the person has otherwise become incapable of performing the person’s duties as a general partner under this chapter or the partnership agreement;
(7) the person becomes a debtor in bankruptcy, executes an assignment for the benefit of creditors, or seeks, consents, or acquiesces to the appointment of a trustee, receiver, or liquidator of the person or of all or substantially all of the person’s property;
(8) in the case of a person that is a trust or is acting as a general partner by virtue of being a trustee of a trust, the trust’s entire transferable interest in the limited partnership is distributed, but not merely by reason of the substitution of a successor trustee;
(9) in the case of a person that is an estate or is acting as a general partner by virtue of being a personal representative of an estate, the estate’s entire transferable interest in the limited partnership is distributed, but not merely by reason of the substitution of a successor personal representative;
(10) in the case of a general partner that is not an individual, the legal existence of the person otherwise terminates;
(11) the transfer of a general partner’s entire remaining transferable interest to another partner;
(12) the transfer of a general partner’s entire remaining transferable interest to a transferee upon the transferee’s becoming a partner; or
(13) the limited partnership’s participation in a conversion or merger under Article 10 of this chapter or Article 8 of Chapter 1, if the limited partnership:
(A) is not the converted or surviving entity; or
(B) is the converted or surviving entity but, as a result of the conversion or merger, the person ceases to be a general partner.
(Act 2016-379, §1.)
(a) A person has the power to dissociate as a general partner at any time, rightfully or wrongfully, by express will pursuant to Section 10A-9A-6.03(1).
(b) A person’s dissociation as a general partner is wrongful only if:
(1) it is in breach of an express provision of the limited partnership; or
(2) it occurs before the completion of the winding up of the limited partnership, and:
(A) the person dissociates as a general partner by express will;
(B) the person is expelled as a general partner by judicial order under Section 10A-9A-6.03(5);
(C) the person is dissociated as a general partner by becoming a debtor in bankruptcy; or
(D) in the case of a person that is not an individual, trust other than a business trust, or estate, the person is expelled or otherwise dissociated as a general partner because it willfully dissolved or terminated.
(c) A person that wrongfully dissociates as a general partner is liable to the limited partnership and, subject to Section 10A-9A-9.01, to the other partners for damages caused by the dissociation. The liability is in addition to any other obligation of the general partner to the limited partnership or to the other partners.
(Act 2016-379, §1.)
(a) Upon a person’s dissociation as a general partner:
(1) the person’s right to participate as a general partner in the management and conduct of the partnership’s activities and affairs terminates;
(2) the person’s duty to refrain from competing with the limited partnership in the conduct or winding up of the limited partnership’s activities and affairs terminates;
(3) the person’s following duties continue only with regard to matters arising and events occurring before the person’s dissociation as a general partner:
(A) the duty to account to the limited partnership and hold as trustee for it any property, profit, or benefit derived by the general partner in the conduct and winding up of the limited partnership’s activities and affairs or derived from a use by the general partner of limited partnership property, including the appropriation of a limited partnership opportunity;
(B) the duty to refrain from dealing with the limited partnership in the conduct or winding up of the limited partnership’s activities and affairs as or on behalf of a party having an interest adverse to the limited partnership; and
(C) the duty of care under Section 10A-9A-4.08;
(4) the person may sign and deliver for filing in accordance with Article 4 of Chapter 1, a statement of dissociation pertaining to the person and, at the request of the limited partnership, if the limited partnership has not filed a statement of dissolution, shall sign an amendment to the certificate of formation which states that the person has dissociated; and
(5) subject to Section 10A-9A-7.04, Article 10 of this chapter and Article 8 of Chapter 1, any transferable interest owned by the person immediately before dissociation in the person’s capacity as a general partner is owned immediately after dissociation by the person as a mere transferee.
(b) A person’s dissociation as a general partner does not of itself discharge the person from any duty, debt, obligation, or liability to the limited partnership or the other partners which the person incurred while a general partner.
(Act 2016-379, §1.)
(a) After a person is dissociated as a general partner and before the limited partnership is dissolved, converted under Article 10 of this chapter or under Article 8 of Chapter 1, or merged out of existence under Article 10 of this chapter or Article 8 of Chapter 1, the limited partnership is bound by an act of the person only if:
(1) the act would have bound the limited partnership under Section 10A-9A-4.02 before the dissociation; and
(2) at the time the other party enters into the transaction the other party does not have notice of the dissociation and reasonably believes that the person is a general partner.
(b) If a limited partnership is bound under subsection (a), the person dissociated as a general partner which caused the limited partnership to be bound is liable:
(1) to the limited partnership for any damage caused to the limited partnership arising from the obligation incurred under subsection (a); and
(2) if a general partner or another person dissociated as a general partner is liable for the obligation, to the general partner or other person for any damage caused to the general partner or other person arising from the liability.
(Act 2016-379, §1.)
(a) A person’s dissociation as a general partner does not of itself discharge the person’s liability as a general partner for a debt, obligation, or liability of the limited partnership incurred before dissociation. Except as otherwise provided in subsections (b) and (c), the person is not liable for a limited partnership’s debts, obligations, or liabilities incurred after dissociation.
(b) A person whose dissociation as a general partner resulted in a dissolution and winding up of the limited partnership’s activities and affairs is liable to the same extent as a general partner under Section 10A-9A-4.04 on an obligation incurred by the limited partnership under Section 10A-9A-8.04.
(c) A person that has dissociated as a general partner but whose dissociation did not result in a dissolution and winding up of the limited partnership’s activities and affairs is liable on a transaction entered into by the limited partnership after the dissociation only if:
(1) a general partner would be liable on the transaction; and
(2) at the time the other party enters into the transaction the other party does not have notice of the dissociation and reasonably believes that the person is a general partner.
(d) By agreement with a creditor of a limited partnership and the limited partnership, a person dissociated as a general partner may be released from liability for an obligation of the limited partnership.
(e) A person dissociated as a general partner is released from liability for a debt, obligation, or liability of the limited partnership if the limited partnership’s creditor, with notice of the person’s dissociation as a general partner but without the person’s consent, agrees to a material alteration in the nature or time of payment of the debt, obligation, or liability.
(Act 2016-379, §1.)
The only interest of a partner which is transferable is the partner’s transferable interest. A transferable interest is personal property.
(Act 2016-379, §1.)
(a) A transfer, in whole or in part, of a partner’s transferable interest:
(1) is permissible;
(2) does not by itself cause the partner’s dissociation;
(3) does not by itself cause a dissolution and winding up of the limited partnership; and
(4) subject to Section 10A-9A-7.04, does not entitle the transferee to:
(A) participate in the management or conduct of the limited partnership’s activities and affairs; or
(B) except as otherwise provided in subsection (d), have access to required information, records, or other information concerning the partnership’s activities and affairs.
(b) A transferee has the right to receive, in accordance with the transfer, distributions to which the transferor would otherwise be entitled.
(c) A transferable interest may be evidenced by a certificate of transferable interest issued by the limited partnership. A partnership agreement may provide for the transfer of the transferable interest represented by the certificate and make other provisions with respect to the certificate. No certificate of transferable interest shall be issued in bearer form.
(d) In a dissolution and winding up, a transferee is entitled to an account of the limited partnership’s transactions only from the date of dissolution.
(e) Except as otherwise provided in Sections 10A-9A-6.01(b)(3), 10A-9A-6.01(b)(10), 10A-9A-6.01(b)(11), 10A-9A-6.03(4)(B), 10A-9A-6.03(11), and 10A-9A-6.03(12) when a partner transfers a transferable interest, the transferor retains the rights of a partner other than the right to distributions transferred and retains all duties and obligations of a partner.
(f) A limited partnership need not give effect to a transferee’s rights under this section until the limited partnership has notice of the transfer.
(g) When a partner transfers a transferable interest to a person that is admitted as a partner with respect to the transferred interest, the transferee is liable for the partner’s obligations under Sections 10A-9A-5.02 and 10A-9A-5.08 to the extent that the obligations are known to the transferee when the transferee voluntarily accepts admission as a partner.
(h) Notwithstanding anything in Title 43 to the contrary, a partnership agreement may provide that a transferable interest may or shall be transferred in whole or in part, with or without consideration, to one or more persons at the death of the holder of the transferable interest. Any transferable interest transferred pursuant to this subsection shall be subject to any outstanding charging order under Section 10A-9A-7.03. This subsection does not limit the rights of creditors of holders of transferable interests against transferees under this chapter or other laws of this state.
(Act 2016-379, p. 934, §1; Act 2025-281, §7.)
(a) On application to a court of competent jurisdiction by any judgment creditor of a partner or transferee, the court may charge the transferable interest of the judgment debtor with payment of the unsatisfied amount of the judgment with interest. To the extent so charged and after the limited partnership has been served with the charging order, the judgment creditor has only the right to receive any distribution or distributions to which the judgment debtor would otherwise be entitled in respect of the transferable interest.
(b) The limited partnership, after being served with a charging order and its terms, shall be entitled to pay or deposit any distribution or distributions to which the judgment debtor would otherwise be entitled in respect of the charged transferable interest into the hands of the clerk of the court so issuing the charging order, and the payment or deposit shall discharge the limited partnership and the judgment debtor from liability for the amount so paid or deposited and any interest that might accrue thereon. Upon receipt of the payment or deposit, the clerk of the court shall notify the judgment creditor of the receipt of the payment or deposit. The judgment creditor shall, after any payment or deposit into the court, petition the court for payment of so much of the amount paid or deposited as is held by the court as may be necessary to pay the judgment creditor’s judgment. To the extent the court has excess amounts paid or deposited on hand after the payment to the judgment creditor, the excess amounts paid or deposited shall be distributed to the judgment debtor and the charging order shall be extinguished. The court, may in its discretion, order the clerk to deposit, pending the judgment creditor’s petition, any money paid or deposited with the clerk, in an interest bearing account at a bank authorized to receive deposits of public funds.
(c) A charging order constitutes a lien on the judgment debtor’s transferable interest.
(d) Subject to subsection (c):
(1) a judgment debtor that is a partner retains the rights of a partner and remains subject to all duties and obligations of a partner; and
(2) a judgment debtor that is a transferee retains the rights of a transferee and remains subject to all duties and obligations of a transferee.
(e) This chapter does not deprive any partner or transferee of the benefit of any exemption laws applicable to the partner’s or transferee’s transferable interest.
(f) This section provides the exclusive remedy by which a judgment creditor of a partner or transferee may satisfy a judgment out of the judgment debtor’s transferable interest and the judgment creditor shall have no right to foreclose, under this chapter or any other law, upon the charging order, the charging order lien, or the judgment debtor’s transferable interest. A judgment creditor of a partner or transferee shall have no right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of a limited partnership. Court orders for actions or requests for accounts and inquiries that the judgment debtor might have made, are not available to the judgment creditor attempting to satisfy the judgment out of the judgment debtor’s transferable interest and may not be ordered by a court.
(Act 2016-379, §1.)
If a partner dies, the deceased partner’s personal representative or other legal representative may:
(a) for the period of time, if any, that the deceased partner’s personal representative or other legal representative holds the deceased partner’s transferable interest:
(1) exercise the rights of a holder of transferable interests under this chapter;
(2) exercise the rights of a transferee under Section 10A-9A-7.02; and
(3) for purposes of settling the estate, exercise the rights of a current limited partner under Section 10A-9A-3.04; and
(b) for the period of time that the deceased partner’s personal representative or other legal representative does not hold the deceased partner’s transferable interest, for purposes of settling the estate, exercise the rights of a person dissociated as a limited partner under Section 10A-9A-3.04.
(Act 2016-379, p. 934, §1; Act 2025-281, §7.)
A limited partnership is dissolved and its activities and affairs shall be wound up upon the occurrence of the first of the following events:
(a) An event or circumstance that the partnership agreement states causes dissolution.
(b) Consent of all partners to dissolve.
(c) When there is no remaining general partner, unless either of the following applies:
(1) All of the limited partners agree in writing, within 90 days after the dissociation of the last general partner, to continue the activities and affairs of the limited partnership and to admit one or more new general partners.
(2) The activities and affairs of the limited partnership are continued and one or more new general partners are admitted in the manner stated in the partnership agreement.
(d) When there is no remaining limited partner, unless either of the following applies:
(1) All of the general partners agree in writing, within 90 days after the dissociation of the last limited partner, to continue the activities and affairs of the limited partnership and to admit one or more new limited partners.
(2) The activities and affairs of the limited partnership are continued and one or more new limited partners are admitted in the manner stated in the partnership agreement.
(e) When there are no remaining partners, unless either of the following applies:
(1) The holders of all of the transferable interests in the limited partnership agree in writing, within 90 days after the dissociation of the last general partner, to continue the activities and affairs of the limited partnership and to admit one or more new general partners and one or more new limited partners.
(2) The activities and affairs of the limited partnership are continued and one or more new general partners and one or more new limited partners are admitted in the manner stated in the partnership agreement.
(f) On application by a partner, the entry of an order dissolving the limited partnership on the grounds that it is not reasonably practicable to carry on the limited partnership’s activities and affairs in conformity with the partnership agreement, which order is entered by the designated court, and if none, the circuit court for the county in which the limited partnership’s principal office within this state is located, and if the limited partnership does not have a principal office within this state then by the circuit court for the county in which the limited partnership’s most recent registered office is located.
(Act 2016-379, p. 934, §1; Act 2020-73, §10.)
(a) A dissolved limited partnership continues its existence as a limited partnership but may not carry on any activities and affairs except as is appropriate to wind up and liquidate its activities and affairs, including:
(1) collecting its assets;
(2) disposing of its properties that will not be distributed in kind to persons owning transferable interests;
(3) discharging or making provisions for discharging its liabilities;
(4) distributing its remaining property in accordance with Section 10A-9A-8.09; and
(5) doing every other act necessary to wind up and liquidate its activities and affairs.
(b) In winding up its activities and affairs, a limited partnership may:
(1) deliver for filing a statement of dissolution to the Secretary of State setting forth:
(A) The name of the limited partnership;
(B) The unique identifying number or other designation as assigned by the Secretary of State;
(C) That the limited partnership has dissolved;
(D) The name and street mailing address of the general partner who will be winding up the affairs of the limited partnership pursuant to Section 10A-9A-8.03(a), and if none, the name and street address of the person appointed pursuant to Section 10A-9A-8.03(b) or (c) to wind up the activities and affairs of the limited partnership; and
(E) Any other information the limited partnership deems appropriate;
(2) preserve the limited partnership’s activities and affairs and property as a going concern for a reasonable time;
(3) prosecute, defend, or settle actions or proceedings, whether civil, criminal, or administrative;
(4) transfer the limited partnership’s assets;
(5) resolve disputes by mediation or arbitration; and
(6) merge or convert in accordance with Article 10 of this chapter or Article 8 of Chapter 1.
(c) The dissolution of a limited partnership does not:
(1) transfer title to the limited partnership’s property;
(2) prevent the commencement of a proceeding by or against the limited partnership in its limited partnership name;
(3) terminate, abate, or suspend a proceeding pending by or against the limited partnership on the effective date of dissolution;
(4) terminate the authority of its registered agent; or
(5) abate, suspend, or otherwise alter the application of Sections 10A-9A-3.03 and 10A-9A-4.04(b) and (c).
(d) A statement of dissolution shall be deemed to be a filing instrument under Chapter 1.
(Act 2016-379, p. 934, §1; Act 2020-73, §10; Act 2021-299, §5.)
(a) If a dissolved limited partnership has a general partner or general partners that have not dissociated, that general partner or those general partners shall wind up the activities and affairs of the limited partnership and shall have the powers set forth in Section 10A-9A-8.04.
(b) If a dissolved limited partnership does not have a general partner, a person or persons to wind up the dissolved limited partnership’s activities and affairs may be appointed by the consent of a majority of the limited partners.
(c) The designated court, and if none, the circuit court for the county in which the limited partnership’s principal office within this state is located, and if the limited partnership does not have a principal office within this state then the circuit court for the county in which the limited partnership’s most recent registered office is located, may order judicial supervision of the winding up of a dissolved limited partnership, including the appointment of a person to wind up the limited partnership’s activities and affairs:
(1) on application of a partner, if the applicant establishes good cause;
(2) on application of a partner or transferee, if the limited partnership does not have a general partner and within a reasonable time following the dissolution no person having the authority to wind up the activities and affairs of the limited partnership has been appointed pursuant to subsection (b);
(3) on application of a partner or transferee, if the limited partnership does not have a general partner and within a reasonable time following the dissolution the person appointed pursuant to subsection (b) is not winding up the activities and affairs of the limited partnership; or
(4) in connection with a proceeding under Section 10A-9A-8.01(f).
(d) A person appointed under subsection (b) or (c) is not a general partner but:
(1) has the powers of a general partner under Section 10A-9A-8.04 but is not liable for the debts, liabilities, and other obligations of the limited partnership solely by reason of having or exercising those powers or otherwise acting to wind up the activities and affairs of the dissolved limited partnership; and
(2) shall promptly deliver for filing a statement of dissolution to the Secretary of State setting forth the items listed in Section 10A-9A-8.02(b)(1) and the following:
(A) that the limited partnership does not have a general partner;
(B) the name and street mailing address of each person that has been appointed to wind up the activities and affairs of the limited partnership;
(C) that each person has been appointed pursuant to this subsection to wind up the activities and affairs of the limited partnership; and
(D) pursuant to this section, that each person has the powers of a general partner under Section 10A-9A-8.04 but is not liable for the debts, liabilities, and other obligations of the limited partnership solely by reason of having or exercising those powers or otherwise acting to wind up the activities and affairs of the dissolved limited partnership.
(Act 2016-379, p. 934, §1; Act 2020-73, §10.)
(a) A limited partnership is bound by a general partner’s act after dissolution which:
(1) is appropriate for winding up the limited partnership’s activities and affairs; or
(2) would have bound the limited partnership under Section 10A-9A-4.02 before dissolution, if, at the time the other party enters into the transaction, the other party does not have notice of the dissolution.
(b) A person dissociated as a general partner binds a limited partnership through an act occurring after dissolution only if:
(1) at the time the other party enters into the transaction the other party does not have notice of the dissociation and reasonably believes that the person is a general partner; and
(2) the act:
(A) is appropriate for winding up the limited partnership’s activities and affairs; or
(B) would have bound the limited partnership under Section 10A-9A-4.02 before dissolution and at the time the other party enters into the transaction the other party does not have notice of the dissolution.
(Act 2016-379, §1.)
(a) If a general partner having knowledge of the dissolution causes a limited partnership to incur an obligation under Section 10A-9A-8.04(a) by an act that is not appropriate for winding up the partnership’s activities and affairs, the general partner is liable:
(1) to the limited partnership for any damage caused to the limited partnership arising from the obligation; and
(2) if another general partner or a person dissociated as a general partner is liable for the obligation, to that other general partner or person for any damage caused to that other general partner or person arising from the liability.
(b) If a person dissociated as a general partner causes a limited partnership to incur an obligation under Section 10A-9A-8.04(b), the person is liable:
(1) to the limited partnership for any damage caused to the limited partnership arising from the obligation; and
(2) if a general partner or another person dissociated as a general partner is liable for the obligation, to the general partner or other person for any damage caused to the general partner or other person arising from the liability.
(Act 2016-379, §1.)
(a) A dissolved limited partnership may dispose of any known claims against it by following the procedures described in subsection (b) at any time after the effective date of the dissolution of the limited partnership.
(b) A dissolved limited partnership may give notice of the dissolution in a record to the holder of any known claim. The notice must:
(1) identify the dissolved limited partnership;
(2) describe the information required to be included in a claim;
(3) provide a mailing address to which the claim is to be sent;
(4) state the deadline, which may not be fewer than 120 days from the effective date of the notice, by which the dissolved partnership must receive the claim;
(5) state that if not sooner barred, the claim will be barred if not received by the deadline; and
(6) unless the limited partnership has been throughout its existence a limited liability limited partnership, state that the barring of a claim against the limited partnership will also bar any corresponding claim against any general partner or person dissociated as a general partner which is based on Section 10A-9A-4.04.
(c) Unless sooner barred by any other statute limiting actions, a claim against a dissolved limited partnership is barred:
(1) if a claimant who was given notice under subsection (b) does not deliver the claim to the dissolved limited partnership by the deadline; or
(2) if a claimant whose claim was rejected by the dissolved limited partnership, does not commence a proceeding to enforce the claim within 90 days from the effective date of the rejection notice.
(d) For purposes of this section, “known claim” or “claim” includes unliquidated claims, but does not include a contingent liability that has not matured so that there is no immediate right to bring suit or a claim based on an event occurring after the effective date of dissolution.
(e) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(Act 2016-379, p. 934, §1; Act 2021-299, §5.)
(a) A dissolved limited partnership may publish notice of its dissolution and request that persons with claims against the dissolved limited partnership present them in accordance with the notice.
(b) The notice authorized by subsection (a) must:
(1) be published at least one time in a newspaper of general circulation in the county in which the dissolved limited partnership’s principal office is located in this state, and if none in this state, in the county in which the limited partnership’s most recent registered office is located;
(2) describe the information that must be included in a claim and provide a mailing address to which the claim is to be sent;
(3) state that if not sooner barred, a claim against the dissolved limited partnership will be barred unless a proceeding to enforce the claim is commenced within two years after the publication of the notice; and
(4) unless the limited partnership has been throughout its existence a limited liability limited partnership, state that the barring of a claim against the limited partnership will also bar any corresponding claim against any general partner or person dissociated as a general partner which is based on Section 10A-9A-4.04.
(c) If a dissolved limited partnership publishes a newspaper notice in accordance with subsection (b), unless sooner barred by any other statute limiting actions, the claim of each of the following claimants is barred unless the claimant commences a proceeding to enforce the claim against the dissolved limited partnership within two years after the publication date of the newspaper notice:
(1) a claimant who was not given notice under Section 10A-9A-8.06;
(2) a claimant whose claim was timely sent to the dissolved limited partnership but not acted on by the dissolved limited partnership; and
(3) a claimant whose claim is contingent at the effective date of the dissolution of the limited partnership, or is based on an event occurring after the effective date of the dissolution of the limited partnership.
(d) A claim that is not barred under this section, any other statute limiting actions, or Section 10A-9A-8.06 may be enforced:
(1) against a dissolved limited partnership, to the extent of its undistributed assets;
(2) except as provided in subsection (h), if the assets of a dissolved limited partnership have been distributed after dissolution, against the person or persons owning the transferable interests to the extent of that person’s proportionate share of the claim or of the assets distributed to that person after dissolution, whichever is less, but a person’s total liability for all claims under subsection (d) may not exceed the total amount of assets distributed to that person after dissolution of the limited partnership; or
(3) against any person liable on the claim under Section 10A-9A-4.04 and 10A-9A-6.07.
(e) A dissolved limited partnership that published a notice under this section may file an application with the designated court, and if none the circuit court for the county in which the dissolved limited partnership’s principal office is located in this state and if the dissolved limited partnership does not have a principal office within this state, in the circuit court for the county in which the dissolved limited partnership’s most recent registered office is located, for a determination of the amount and form of security to be provided for payment of claims that are contingent or have not been made known to the dissolved limited partnership or that are based on an event occurring after the effective date of the dissolution of the limited partnership but that, based on the facts known to the dissolved limited partnership, are reasonably estimated to arise after the effective date of the dissolution of the limited partnership. Provision need not be made for any claim that is or is reasonably anticipated to be barred under subsection (c).
(f) Within 10 days after the filing of the application provided for in subsection (e), notice of the proceeding shall be given by the dissolved limited partnership to each potential claimant as described in subsection (e).
(g) The circuit court under subsection (e) may appoint a guardian ad litem to represent all claimants whose identities are unknown in any proceeding brought under this section. The reasonable fees and expenses of the guardian, including all reasonable expert witness fees, shall be paid by the dissolved limited partnership.
(h) Provision by the dissolved limited partnership for security in the amount and the form ordered by the circuit court under subsection (e) shall satisfy the dissolved limited partnership’s obligation with respect to claims that are contingent, have not been made known to the dissolved limited partnership, or are based on an event occurring after the effective date of the dissolution of the limited partnership, and those claims may not be enforced against a person owning a transferable interest to whom assets have been distributed by the dissolved limited partnership after the effective date of the dissolution of the limited partnership.
(i) Nothing in this section shall be deemed to extend any otherwise applicable statute of limitations.
(j) If a claim has been satisfied, disposed of, or barred under Section 10A-9A-8.06, this section, or other law, the person or persons designated to wind up the affairs of a limited partnership, and the owners of the transferable interests receiving assets from the limited partnership, shall not be liable for that claim.
(Act 2016-379, p. 934, §1; Act 2020-73, §10; Act 2021-299, §5.)
If a claim against a dissolved limited partnership is barred under Section 10A-9A-8.06 or 10A-9A-8.07, any corresponding claim under Section 10A-9A-4.04 or 10A-9A-6.07 is also barred.
(Act 2016-379, §1.)
Upon the winding up of a limited partnership, the assets of the limited partnership, including any obligation under Article 5 of this chapter, and any contribution required by this section, shall be applied as follows:
(a) Payment, or adequate provision for payment, shall be made to creditors, including, to the extent permitted by law, partners who are creditors, in satisfaction of liabilities of the limited partnership.
(b) After a limited partnership complies with subsection (a), any surplus must be distributed:
(1) first, to each person owning a transferable interest that reflects contributions made on account of the transferable interest and not previously returned, an amount equal to the value of the person’s unreturned contributions; and
(2) then to each person owning a transferable interest in the proportions in which the owners of transferable interests share in distributions before dissolution.
(c) If the limited partnership does not have sufficient surplus to comply with subsection (b)(1), any surplus must be distributed among the owners of transferable interests in proportion to the value of their respective unreturned contributions.
(d) If a limited partnership’s assets are insufficient to satisfy all of its obligations under subsection (a), with respect to each unsatisfied obligation incurred when the limited partnership was not a limited liability limited partnership, the following rules apply:
(1) Each person that was a general partner when the obligation was incurred and that has not been released from the obligation under Section 10A-9A-6.07 shall contribute to the limited partnership for the purpose of enabling the limited partnership to satisfy the obligation. The contribution due from each of those persons is in proportion to the right to receive distributions in the capacity of general partner in effect for each of those persons when the obligation was incurred.
(2) If a person does not contribute the full amount required under paragraph (1) with respect to an unsatisfied obligation of the limited partnership, the other persons required to contribute by paragraph (1) on account of the obligation shall contribute the additional amount necessary to discharge the obligation. The additional contribution due from each of those other persons is in proportion to the right to receive distributions in the capacity of general partner in effect for each of those other persons when the obligation was incurred.
(3) If a person does not make the additional contribution required by paragraph (2), further additional contributions are determined and due in the same manner as provided in that paragraph.
(e) A person that makes an additional contribution under subsection (d)(2) or (3) may recover from any person whose failure to contribute under subsection (d)(1) or (2) necessitated the additional contribution. A person may not recover under this subsection more than the amount additionally contributed. A person’s liability under this subsection may not exceed the amount the person failed to contribute.
(f) The estate of a deceased individual is liable for the person’s obligations under this section.
(g) An assignee for the benefit of creditors of a limited partnership or a partner, or a person appointed by a court to represent creditors of a limited partnership or a partner, may enforce a person’s obligation to contribute under subsection (d).
(Act 2016-379, p. 934, §1; Act 2021-299, §5.)
A limited partnership that has been dissolved may be reinstated upon compliance with the following conditions:
(a) the consent shall have been obtained from the partners or other persons entitled to consent at the time that is:
(1) required for reinstatement under the partnership agreement; or
(2) if the partnership agreement does not state the consent required for reinstatement, sufficient for dissolution under the partnership agreement; or
(3) if the partnership agreement neither states the consent required for reinstatement nor for dissolution, sufficient for dissolution under this chapter;
(b) in the case of a written objection to reinstatement having been delivered to the limited partnership before or at the time of the consent required by subsection (a) by the partners or other persons having authority under the partnership agreement to bring about or prevent dissolution of the limited partnership, those partners or persons withdrawing that written objection effective at the time of the consent required by subsection (a);
(c) in the case of a limited partnership dissolved in a judicial proceeding initiated by one or more of the partners, the consent of each of those partners shall have been obtained and shall be included in the consent required by subsection (a); and
(d) the filing of a certificate of reinstatement in accordance with Section 10A-9A-8.11.
(Act 2016-379, p. 934, §1; Act 2021-299, §5.)
(a) In order to reinstate a limited partnership under this article, a certificate of reinstatement shall be delivered for filing to the Secretary of State which certificate of reinstatement shall have attached thereto a true and complete copy of the limited partnership’s certificate of formation. The certificate of reinstatement shall state:
(1) the name of the limited partnership before reinstatement;
(2) the name of the limited partnership following reinstatement, which limited partnership name shall comply with Section 10A-9A-8.12;
(3) the date of formation of the limited partnership;
(4) the date of dissolution of the limited partnership, if known;
(5) a statement that all applicable conditions of Section 10A-9A-8.10 have been satisfied;
(6) the address of the registered office and the name of the registered agent at that address in compliance with Article 5 of Chapter 1; and
(7) the unique identifying number or other designation as assigned by the Secretary of State.
(b) A limited partnership shall not be required to file a statement of dissolution in order to file a certificate of reinstatement.
(c) A certificate of reinstatement shall be deemed to be a filing instrument under Chapter 1.
(Act 2016-379, p. 934, §1; Act 2020-73, §10.)
The name of a limited partnership following reinstatement shall be determined as follows:
(a) If the limited partnership remains in the Secretary of State’s records as a limited partnership which has not been dissolved, then the name of the limited partnership following reinstatement shall be that limited partnership name at the time of reinstatement.
(b) If the limited partnership is listed in the Secretary of State’s records as a limited partnership that has been dissolved, then the name of a limited partnership following reinstatement shall be that limited partnership name at the time of reinstatement if that limited partnership name complies with Article 5 of Chapter 1 at the time of reinstatement. If that limited partnership name does not comply with Article 5 of Chapter 1, the name of the limited partnership following reinstatement shall be that limited partnership name followed by the word “reinstated.”
(c) A limited partnership shall not be required to file a statement of dissolution in order to retain or obtain the name of the limited partnership.
(Act 2016-379, §1.)
(a) Subject to subsection (b), upon reinstatement, the limited partnership shall be deemed for all purposes to have continued its activities and affairs as if dissolution had never occurred; and each right inuring to, and each debt, obligation, and liability incurred by, the limited partnership after the dissolution shall be determined as if the dissolution had never occurred.
(b) The rights of persons acting in reliance on the dissolution before those persons had notice of the reinstatement shall not be adversely affected by the reinstatement.
(Act 2016-379, §1.)
(a) Subject to subsection (b), a partner may maintain a direct action against another partner or partners or the limited partnership, with or without an accounting as to the partnership’s activities and affairs, to enforce the partner’s rights and otherwise protect the partner’s interests, including rights and interests under the partnership agreement or this chapter or arising independently of the partnership relationship.
(b) A partner maintaining a direct action under subsection (a) must plead and prove an actual or threatened injury that is not solely the result of an injury suffered or threatened to be suffered by the limited partnership.
(c) A partner may maintain a direct action to enforce a right of a limited partnership if all partners at the time of suit are parties to the action.
(d) The accrual of, and any time limitation on, a right of action for a remedy under this section is governed by other law.
(e) A right to an accounting upon a dissolution and winding up does not revive a claim barred by law.
(Act 2016-379, §1.)
A partner may commence or maintain a derivative action in the right of a limited partnership to enforce a right of the limited partnership by complying with this article.
(Act 2016-379, §1, p. 934, ; Act 2025-281, §7.)
A partner may commence or maintain a derivative action in the right of the limited partnership only if the partner:
(1) fairly and adequately represents the interests of the limited partnership in enforcing the right of the limited partnership; and
(2) either:
(A) was a partner of the limited partnership at the time of the act or omission of which the partner complains; or
(B) whose status as a partner devolved upon the person by operation of law or pursuant to the terms of the partnership agreement from a person who was a partner at the time of the act or omission of which the partner complains.
(Act 2016-379, §1.)
A partner may commence a derivative action in the right of the limited partnership, if:
(a) the partner first makes a written demand upon general partners requesting that they cause the limited partnership to bring an action to enforce the right and the general partners do not bring the action within a reasonable time; or
(b) a demand under subsection (a) would be futile.
(Act 2016-379, §1.)
In a derivative action, the complaint must state with particularity:
(a) the date and content of plaintiff’s demand and the general partner’s response by the limited partnership to the demand; or
(b) why the demand should be excused as futile.
(Act 2016-379, §1.)
For the purpose of allowing the general partners and the limited partnership time to undertake an inquiry into the allegations made in the demand or complaint commenced pursuant to this article, the court may stay any derivative action for the period the court deems appropriate.
(Act 2016-379, §1.)
A derivative action may not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to partners of the limited partnership in such manner as the court directs.
(Act 2016-379, §1.)
(a) Except as otherwise provided in subsection (b):
(1) any proceeds or other benefits of a derivative action, whether by judgment, compromise, or settlement, belong to the limited partnership and not to the derivative plaintiff; and
(2) if the derivative plaintiff receives any proceeds, the derivative plaintiff shall immediately remit them to the limited partnership.
(b) If a derivative action is successful in whole or in part, the court may award the plaintiff reasonable expenses, including reasonable attorney’s fees, from the recovery of the limited partnership.
(Act 2016-379, §1.)
In any derivative action in the right of a foreign limited partnership, the right of a person to commence or maintain a derivative action in the right of a foreign limited partnership, and any matters raised in the action covered by Sections 10A-9A-9.02 through 10A-9A-9.08, shall be governed by the law of the jurisdiction under which the foreign limited partnership was formed; except that any matters raised in the action covered by Sections 10A-9A-9.06, 10A-9A-9.07, and 10A-9A-9.08 shall be governed by the law of this state.
(Act 2016-379, §1.)
As used in this article, unless the context otherwise requires, the following terms mean:
(1) CONSTITUENT LIMITED PARTNERSHIP means a constituent organization that is a limited partnership.
(2) CONSTITUENT ORGANIZATION means an organization that is party to a merger under this article.
(3) CONVERTED ORGANIZATION means the organization into which a converting organization converts pursuant to this article.
(4) CONVERTING LIMITED PARTNERSHIP means a converting organization that is a limited partnership.
(5) CONVERTING ORGANIZATION means an organization that converts into another organization pursuant to this article.
(6) GENERAL PARTNER means a general partner of a limited partnership.
(7) GOVERNING STATUTE of an organization means the statute that governs the organization’s internal affairs.
(8) ORGANIZATION means a general partnership, including a limited liability partnership; limited partnership, including a limited liability limited partnership; limited liability company; business trust; corporation; nonprofit corporation; professional corporation; or any other person having a governing statute. The term includes domestic and foreign organizations whether or not organized for profit.
(9) ORGANIZATIONAL DOCUMENTS means:
(A) for a general partnership or foreign general partnership, its partnership agreement and if applicable, its registration as a limited liability partnership or a foreign limited liability partnership;
(B) for a limited partnership or foreign limited partnership, its certificate of formation and partnership agreement, or comparable writings as provided in its governing statute;
(C) for a limited liability company or foreign limited liability company, its certificate of formation and limited liability company agreement, or comparable writings as provided in its governing statute;
(D) for a business or statutory trust or foreign business or statutory trust its agreement of trust and declaration of trust, or comparable writings as provided in its governing statute;
(E) for a corporation for profit or foreign corporation for profit, its certificate of formation, bylaws, and other agreements among its shareholders that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(F) for a nonprofit corporation or foreign nonprofit corporation, its certificate of formation, bylaws, and other agreements that are authorized by its governing statute, or comparable writings as provided in its governing statute;
(G) for a professional corporation or foreign professional corporation, its certificate of formation, bylaws, and other agreements among its shareholders that are authorized by its governing statute, or comparable writings as provided in its governing statute; and
(H) for any other organization, the basic writings that create the organization and determine its internal governance and the relations among the persons that own it, have an interest in it, or are members of it.
(10) PLAN OF MERGER. Except as set forth in Section 10A-9A-10.06(e), a plan of merger, whether referred to as a plan of merger, an agreement of merger, a merger agreement, a plan and agreement of merger, an agreement and plan of merger, or otherwise, means a writing described in Section 10A-9A-10.06 and includes any agreement, instrument, or other document referenced therein or associated therewith that sets forth the terms and conditions of the merger.
(11) SURVIVING ORGANIZATION means an organization into which one or more other organizations are merged under this article, whether the organization pre-existed the merger or was created pursuant to the merger.
(Act 2016-379, p. 934, §1; Act 2021-299, §5; Act 2025-281, §7.)
(a) An organization other than a limited partnership may convert to a limited partnership, and a limited partnership may convert to an organization other than a limited partnership pursuant to this section, Sections 10A-9A-10.03 through 10A-9A-10.05, and a plan of conversion, if:
(1) the governing statute of the organization that is not a limited partnership authorizes the conversion;
(2) the law of the jurisdiction governing the converting organization and the converted organization does not prohibit the conversion; and
(3) the converting organization and the converted organization each comply with the governing statute and organizational documents applicable to that organization in effecting the conversion.
(b) A plan of conversion must be in writing and must include:
(1) the name, type of organization, and mailing address of the principal office of the converting organization, and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;
(2) the name, type of organization, and mailing address of the principal office of the converted organization after conversion;
(3) the terms and conditions of the conversion, including the manner and basis for converting interests in the converting organization into any combination of money, interests in the converted organization, and other consideration allowed in Section 10A-9A-10.02(c); and
(4) the organizational documents of the converted organization.
(c) In connection with a conversion, rights or securities of or interests in the converting organization may be exchanged for or converted into cash, property, or rights or securities of or interests in the converted organization, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, or rights or securities of or interests in another organization or may be cancelled.
(d) At the time of the approval of the plan of conversion in accordance with Section 10A-9A-10.03, the plan of conversion is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of conversion that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of conversion.
(Act 2016-379, p. 934, §1; Act 2019-94, §2; Act 2025-281, §7.)
(a) Subject to Section 10A-9A-10.10, a plan of conversion must be consented to by all the partners of a converting limited partnership.
(b) Subject to Section 10A-9A-10.10 and any contractual rights, after a conversion is approved, and at any time before a filing is made under Section 10A-9A-10.04, a converting limited partnership may amend the plan or abandon the planned conversion:
(1) as provided in the plan; and
(2) except as prohibited by the plan, by the same consent as was required to approve the plan.
(Act 2016-379, §1.)
(a) After a plan of conversion is approved:
(1) if the converting organization is an organization formed under, or its internal affairs are governed by, the laws of this state, the converting organization shall file a statement of conversion in accordance with subsection (c), which statement of conversion must be signed in accordance with Section 10A-9A-2.03(a) and which must include:
(A) the name, type of organization, and mailing address of the principal office of the converting organization, and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;
(B) the date of the filing of the certificate of formation of the converting organization, if any, and all prior amendments and the filing office or offices, if any, where such is filed;
(C) a statement that the converting organization has been converted into the converted organization;
(D) the name and type of organization of the converted organization and the jurisdiction of its governing statute;
(E) the street and mailing address of the principal office of the converted organization;
(F) the date the conversion is effective under the governing statute of the converted organization;
(G) a statement that the conversion was approved as required by this chapter;
(H) a statement that the conversion was approved as required by the governing statute of the converted organization; and
(I) a statement that a copy of the plan of conversion will be furnished by the converted organization, on request and without cost, to any owner of the converting organization; and
(J) if the converted organization is a foreign organization not authorized to conduct activities and affairs in this state, the street and mailing address of an office for the purposes of Section 10A-9A-10.05(b); and
(2) if the converted organization is a limited partnership, the converting organization shall deliver for filing a certificate of formation in accordance with subsection (d), which certificate of formation must include, in addition to the information required by Section 10A-9A-2.01(a):
(A) a statement that the limited partnership was converted from the converting organization;
(B) the name and type of organization of the converting organization, the jurisdiction of the converting organization’s governing statute, and the converting organization’s unique identifying number or other designation as assigned by the Secretary of State, if any; and
(C) a statement that the conversion was approved in a manner that complied with the converting organization’s governing statute.
(b) A conversion becomes effective:
(1) if the converted organization is a limited partnership, when the certificate of formation takes effect; and
(2) if the converted organization is not a limited partnership, as provided by the governing statute of the converted organization.
(c) If the converting organization is an organization formed under, or its internal affairs are governed by, the laws of this state, then the converting organization shall deliver for filing the statement of conversion required under subsection (a)(1) to the Secretary of State.
(d) If the converted organization is a limited partnership, the converting organization shall deliver for filing the certificate of formation required under subsection (a)(2) to the Secretary of State.
(e) If the converting organization is required to deliver for filing a statement of conversion and a certificate of formation to the Secretary of State, then the converting organization shall deliver for filing the statement of conversion and the certificate of formation to the Secretary of State simultaneously.
(f) After a conversion becomes effective, if the converted organization is a limited partnership, then, except for certified copies of documents permitted to be delivered to the judge of probate for filing pursuant to subsection (h), all filing instruments required to be filed under this title regarding that converted organization shall be filed with the Secretary of State.
(g) If:
(1) the converting organization is a filing entity or a foreign filing entity registered to conduct activities and affairs in this state;
(2) the converted organization will be a filing entity or a foreign filing entity registered to conduct activities and affairs in this state;
(3) the name of the converting organization and the converted organization are to be the same, other than words, phrases or abbreviations indicating the type of entity; and
(4) the name of the converted organization complies with Division A of Article 5 of Chapter 1 or Section 10A-1-7.07, as the case may be; then notwithstanding Division B of Article 5 of Chapter 1, no name reservation shall be required and the converted organization shall for all purposes of this title be entitled to utilize the name of the converting organization without any further action by the converting organization or the converted organization.
(h) A certified copy of any document required to be filed under this section may be filed in the real estate records in the office of the judge of probate in any county in which the converting organization owned real property, without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate shall, however, be entitled to collect a filing fee of five dollars ($5). Any such filing shall evidence chain of title, but lack of filing shall not affect the converted organization’s title to such real property.
(i) A statement of conversion is a filing instrument under Chapter 1.
(j) The filing fees for a statement of conversion shall be as set forth in Chapter 1.
(Act 2016-379, p. 934, §1; Act 2019-94, §2.)
(a) When a conversion takes effect:
(1) all property and contract rights owned by the converting organization remains vested in the converted organization without transfer, reversion, or impairment and the title to any property vested by deed or otherwise in the converting organization shall not revert or be in any way impaired by reason of the conversion;
(2) all debts, obligations, or other liabilities of the converting organization continue as debts, obligations, or other liabilities of the converted organization and neither the rights of creditors, nor the liens upon the property of the converting organization shall be impaired by the conversion;
(3) an action or proceeding pending by or against the converting organization continues as if the conversion had not occurred and the name of the converted entity may, but need not, be substituted for the name of the converting entity in any pending action or proceeding;
(4) except as prohibited by law other than this chapter, all of the rights, privileges, immunities, powers, and purposes of the converting organization remain vested in the converted organization;
(5) except as otherwise provided in the plan of conversion, the terms and conditions of the plan of conversion take effect;
(6) except as otherwise agreed, for all purposes of the laws of this state, the converting organization shall not be required to wind up its affairs or pay its liabilities and distribute its assets, and the conversion shall not be deemed to constitute a dissolution of the converting organization;
(7) for all purposes of the laws of this state, the rights, privileges, powers, interests in property, debts, liabilities, and duties of the converting organization, shall be the rights, privileges, powers, interests in property, debts, liabilities, and duties of the converted organization, and shall not be deemed as a consequence of the conversion, to have been transferred to the converted organization;
(8) if the converted organization is a limited partnership, for all purposes of the laws of this state, the limited partnership shall be deemed to be the same organization as the converting organization, and the conversion shall constitute a continuation of the existence of the converting organization in the form of a limited partnership;
(9) if the converted organization is a limited partnership, the existence of the limited partnership shall be deemed to have commenced on the date the converting organization commenced its existence in the jurisdiction in which the converting organization was first created, formed, organized, incorporated, or otherwise came into being;
(10) the conversion shall not affect the choice of law applicable to matters arising prior to conversion; and
(11) if the Secretary of State has assigned a unique identifying number or other designation to the converting organization and (i) the converted organization is formed pursuant to, or its internal affairs are governed by, the laws of this state or (ii) the converted organization is, within 30 days after the effective date of the conversion, registered to transact business in this state, then that unique identifying number or other designation shall continue to be assigned to the converted organization.
(b) A converted organization that is a foreign entity consents to the jurisdiction of the courts of this state to enforce any debt, obligation, or other liability for which the converting limited partnership, or series thereof, is liable if, before the conversion, the converting limited partnership was subject to suit in this state on the debt, obligation, or other liability. If a converted organization that is a foreign entity fails to designate or maintain a registered agent, or the designated registered agent cannot with reasonable diligence be served, then service of process on that converted organization for the purposes of enforcing a debt, obligation, or other liability under this subsection may be made in the same manner and has the same consequences as provided in Section 10A-1-5.35.
(Act 2016-379, p. 934, §1; Act 2019-94, §2.)
(a) A limited partnership may merge with one or more other constituent organizations pursuant to this section, Sections 10A-9A-10.07 through 10A-9A-10.09, and a plan of merger, if:
(1) the governing statute of each of the other organizations authorizes the merger;
(2) the merger is not prohibited by the law of a jurisdiction that enacted any of those governing statutes; and
(3) each of the other organizations complies with its governing statute in effecting the merger.
(b) A plan of merger must be in writing and must include:
(1) the name, type of organization, and mailing address of the principal office of each constituent organization, the jurisdiction of the governing statute of each constituent organization, and the respective unique identifying numbers or other designations as assigned by the Secretary of State, if any, of each constituent organization;
(2) the name, type of organization, and mailing address of the principal office of the surviving organization, the unique identifying number or other designation as assigned by the Secretary of State, if any, of the surviving organization, the jurisdiction of the governing statute of the surviving organization, and, if the surviving organization is to be created pursuant to the merger, a statement to that effect;
(3) the terms and conditions of the merger, including the manner and basis for converting the interests in each constituent organization into any combination of money, interests in the surviving organization, and other consideration as allowed by subsection (c);
(4) if the surviving organization is to be created pursuant to the merger, the surviving organization’s organizational documents; and
(5) if the surviving organization is not to be created pursuant to the merger, any amendments to be made by the merger to the surviving organization’s organizational documents.
(c) In connection with a merger, rights or securities of or interests in a constituent organization may be exchanged for or converted into cash, property, or rights or securities of or interests in the surviving organization, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, or rights or securities of or interests in another organization or may be cancelled.
(d) In addition to the requirements of subsection (b), a plan of merger may:
(1) provide that (i) a constituent organization or any other party to the plan of merger that fails to perform its obligations under the plan of merger in accordance with the terms and conditions of the plan of merger, or that otherwise fails to comply with the terms and conditions of the plan of merger, in each case, required to be performed or complied with prior to the time the merger becomes effective, or that otherwise fails to consummate, or fails to cause the consummation of, the merger (whether prior to a specified date, upon satisfaction or, to the extent permitted by law, waiver of all conditions to consummation set forth in the plan of merger, or otherwise) shall be subject, in addition to any other remedies available at law or in equity, to the penalties or consequences as are set forth in the plan of merger (which penalties or consequences may include an obligation to pay to the other party or parties to the plan of merger an amount representing, or based on the loss of, any premium or other economic entitlement the owners of the other party would be entitled to receive pursuant to the terms of the plan of merger if the merger were consummated in accordance with the terms of the plan of merger) and (ii) if, pursuant to the terms of the plan of merger, a constituent organization is entitled to receive payment from another party to the plan of merger of any amount representing a penalty or consequence (as specified in clause (i) of this Section 10A-9A-10.06(d)(1), the constituent organization shall be entitled to enforce the other party’s payment obligation and, upon receipt of any payment, shall be entitled to retain the amount of the payment so received;
(2) provide (i) for the appointment, at or after the time at which the plan of merger is adopted by the owners of a constituent organization in accordance with the requirements of Section 10A-9A-10.07, of one or more persons (which may include the surviving or resulting entity or any officer, partner, manager, representative, or agent thereof) as representative of the owners of a constituent organization, including those whose ownership interests shall be cancelled, converted, or exchanged in the merger, and for the delegation to that person or persons of the sole and exclusive authority to take action on behalf of the owners pursuant to the plan of merger, including taking such actions as the representative determines to enforce (including by entering into settlements with respect to) the rights of the owners under the plan of merger, on the terms and subject to the conditions set forth in the plan of merger, (ii) that any appointment pursuant to clause (i) of this Section 10A-9A-10.06(d)(2) shall be irrevocable and binding on all owners from and after the adoption of the plan of merger by the requisite vote of the partners pursuant to Section 10A-9A-10.07, and (iii) that any provision adopted pursuant to this Section 10A-9A-10.06(d)(2) may not be amended after the merger has become effective or may be amended only with the consent or approval of persons specified in the plan of merger; and
(3) contain any other provision not prohibited by law.
(e) At the time of the approval of the plan of merger in accordance with Section 10A-9A-10.07, the plan of merger is not required to contain or have attached thereto any disclosure letter, disclosure schedules, or similar documents or instruments contemplated by the plan of merger that modify, supplement, qualify, or make exceptions to representations, warranties, covenants, or conditions contained in the plan of merger.
(Act 2016-379, p. 934, §1; Act 2019-94, §2; Act 2025-281, §7.)
(a) Subject to Section 10A-9A-10.10, a plan of merger must be consented to by all the partners of a constituent limited partnership.
(b) Subject to Section 10A-9A-10.10 and any contractual rights, after a merger is approved, and at any time before a filing is made under Section 10A-9A-10.08, a constituent limited partnership may amend the plan or abandon the merger:
(1) as provided in the plan; and
(2) except as prohibited by the plan, with the same consent as was required to approve the plan.
(Act 2016-379, §1.)
(a) After each constituent organization has approved the plan of merger, a statement of merger must be signed on behalf of:
(1) each constituent limited partnership, as provided in Section 10A-9A-2.03(a); and
(2) each other constituent organization, as provided by its governing statute.
(b) A statement of merger under this section must include:
(1) the name, type of organization, and mailing address of the principal office of each constituent organization, the jurisdiction of the governing statute of each constituent organization, and the respective unique identifying numbers or other designations as assigned by the Secretary of State, if any, of each constituent organization;
(2) the name, type of organization, and mailing address of the principal office of the surviving organization, the unique identifying number or other designation as assigned by the Secretary of State, if any, of the surviving organization, the jurisdiction of the governing statute of the surviving organization, and, if the surviving organization is created pursuant to the merger, a statement to that effect;
(3) the date the merger is effective under the governing statute of the surviving organization;
(4) if the surviving organization is to be created pursuant to the merger:
(A) if it will be a limited partnership, the limited partnership’s certificate of formation; or
(B) if it will be an organization other than a limited partnership, any organizational document that creates the organization that is required to be in a public writing;
(5) if the surviving organization exists before the merger, any amendments provided for in the plan of merger for the organizational document that created the organization that are required to be in a public writing;
(6) a statement as to each constituent organization that the merger was approved as required by the organization’s governing statute;
(7) a statement that a copy of the plan of merger will be furnished by the surviving organization, on request and without cost, to any owner of any constituent organization which is a party to the merger;
(8) if the surviving organization is a foreign organization not authorized to conduct activities and affairs in this state, the street and mailing address of an office for the purposes of Section 10A-9A-10.09(b); and
(9) any additional information required by the governing statute of any constituent organization.
(c) The statement of merger shall be delivered for filing to the Secretary of State.
(d) A merger becomes effective under this article:
(1) if the surviving organization is a limited partnership, upon the later of:
(A) the filing of the statement of merger with the Secretary of State; or
(B) as specified in the statement of merger; or
(2) if the surviving organization is not a limited partnership, as provided by the governing statute of the surviving organization.
(e) A certified copy of the statement of merger required to be filed under this section may be filed in the real estate records in the office of the judge of probate in any county in which any constituent organization owned real property, without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate, however, shall be entitled to collect the filing fee of five dollars ($5). Any such filing shall evidence chain of title, but lack of filing shall not affect the surviving organization’s title to such real property.
(f) A statement of merger is a filing instrument under Chapter 1.
(g) The filing fees for a statement of merger shall be as set forth in Chapter 1.
(Act 2016-379, p. 934, §1; Act 2019-94, §2; Act 2023-503, §7.)
(a) When a merger becomes effective:
(1) the surviving organization continues or, in the case of a surviving organization created pursuant to the merger, comes into existence;
(2) each constituent organization that merges into the surviving organization ceases to exist as a separate entity;
(3) except as provided in the plan of merger all property owned by, and every contract right possessed by, each constituent organization that ceases to exist vests in the surviving organization without transfer, reversion, or impairment and the title to any property and contract rights vested by deed or otherwise in the surviving organization shall not revert, be in any way impaired, or be deemed to be a transfer by reason of the merger;
(4) all debts, obligations, and other liabilities of each constituent organization, other than the surviving organization, are debts, obligations, and other liabilities of the surviving organization, and neither the rights of creditors, nor any liens upon the property of any constituent organization, shall be impaired by the merger;
(5) an action or proceeding pending by or against any constituent organization continues as if the merger had not occurred and the name of the surviving organization may be, but need not be, substituted in any pending proceeding for the name of any constituent organization whose separate existence ceased in the merger;
(6) except as prohibited by law other than this chapter, or as provided in the plan of merger, all of the rights, privileges, franchises, immunities, powers, and purposes of each constituent organization, other than the surviving organization, vest in the surviving organization;
(7) except as otherwise provided in the plan of merger, the terms and conditions of the plan of merger take effect;
(8) except as otherwise agreed, if a constituent limited partnership ceases to exist, the merger does not dissolve the limited partnership;
(9) if the surviving organization is created pursuant to the merger:
(A) if it is a limited partnership, the certificate of formation becomes effective; or
(B) if it is an organization other than a limited partnership, the organizational documents that create the organization become effective;
(10) if the surviving organization existed before the merger, any amendments provided for in the statement of merger for the organizational documents of that organization become effective;
(11) the transferable interests of each limited partnership that is a constituent organization to the merger, and the ownership interests of each organization that is not a limited partnership, but is a constituent organization to the merger, that are to be converted in accordance with the terms of the merger into transferable interest, ownership interests, other securities, obligations, rights to acquire transferable interest, ownership interests, or other securities, cash, other property, or any combination of the foregoing, are converted, and the former holder of such transferable interests or ownership interests is entitled only to the rights provided to that former holder by those terms or the statute governing that former holder’s constituent organization; and
(12) if the surviving organization exists before the merger:
(i) except as provided in the plan of merger, all the property and contract rights of the surviving organization remain its property and contract rights without transfer, reversion, or impairment;
(ii) the surviving organization remains subject to all its debts, obligations, and other liabilities; and
(iii) except as provided by law other than this chapter, or the plan of merger, the surviving organization continues to hold all of its rights, privileges, franchises, immunities, powers, and purposes.
(b) A surviving organization that is a foreign entity consents to the jurisdiction of this state to enforce any debt, obligation, or other liability owed by a constituent organization, if before the merger the constituent organization was subject to suit in this state on the debt, obligation, or other liability. If a surviving organization that is a foreign entity fails to designate or maintain a registered agent, or the designated registered agent cannot with reasonable diligence be served, then the service of process on that surviving organization for the purposes of enforcing a debt, obligation, or other liability under this subsection may be made in the same manner and has the same consequences as provided in Section 10A-1-5.35.
(Act 2016-379, p. 934, §1; Act 2018-125, §6; Act 2019-94, §2.)
(a) If a partner of a converting or constituent limited partnership will have personal liability with respect to a converted or surviving organization, approval and amendment of a plan of conversion or plan of merger are ineffective without that partner’s consent to the plan.
(b) An amendment to a certificate of formation which deletes a statement that the limited partnership is a limited liability limited partnership is ineffective without each general partner’s written consent to such amendment.
(c) A partner does not give the consent required by subsection (a) or (b) merely by consenting to a provision of the partnership agreement that permits the partnership agreement to be amended with the consent of fewer than all the partners.
(Act 2016-379, §1.)
(a) A conversion or merger under this article does not discharge any liability under Sections 10A-9A-4.04 and 10A-9A-6.07 of a person that was a general partner in or dissociated as a general partner from a converting or constituent limited partnership, but:
(1) the provisions of this chapter pertaining to the collection or discharge of the liability continue to apply to the liability;
(2) for the purposes of applying those provisions, the converted or surviving organization is deemed to be the converting or constituent limited partnership; and
(3) if a person is required to pay any amount under this subsection:
(A) the person has a right of contribution from each other person that was liable as a general partner under Section 10A-9A-4.04 when the obligation was incurred and has not been released from the obligation under Section 10A-9A-6.07; and
(B) the contribution due from each of those persons is in proportion to the right to receive distributions in the capacity of general partner in effect for each of those persons when the obligation was incurred.
(b) In addition to any other liability provided by law:
(1) a person that immediately before a conversion or merger became effective was a general partner in a converting or constituent limited partnership that was not a limited liability limited partnership is personally liable for each obligation of the converted or surviving organization arising from a transaction with a third party after the conversion or merger becomes effective, if, at the time the third party enters into the transaction, the third party:
(A) does not have notice of the conversion or merger; and
(B) reasonably believes that:
(i) the converted or surviving business is the converting or constituent limited partnership;
(ii) the converting or constituent limited partnership is not a limited liability limited partnership; and
(iii) the person is a general partner in the converting or constituent limited partnership; and
(2) a person that was dissociated as a general partner from a converting or constituent limited partnership before the conversion or merger became effective is personally liable for each obligation of the converted or surviving organization arising from a transaction with a third party after the conversion or merger becomes effective, if:
(A) immediately before the conversion or merger became effective the converting or surviving limited partnership was not a limited liability limited partnership; and
(B) at the time the third party enters into the transaction the third party:
(i) does not have notice of the dissociation;
(ii) does not have notice of the conversion or merger; and
(iii) reasonably believes that the converted or surviving organization is the converting or constituent limited partnership, the converting or constituent limited partnership is not a limited liability limited partnership, and the person is a general partner in the converting or constituent limited partnership.
(Act 2016-379, §1.)
(a) An act of a person that immediately before a conversion or merger became effective was a general partner in a converting or constituent limited partnership binds the converted or surviving organization after the conversion or merger becomes effective, if:
(1) before the conversion or merger became effective, the act would have bound the converting or constituent limited partnership under Section 10A-9A-4.02; and
(2) at the time the third party enters into the transaction, the third party:
(A) does not have notice of the conversion or merger; and
(B) reasonably believes that the converted or surviving business is the converting or constituent limited partnership and that the person is a general partner in the converting or constituent limited partnership.
(b) An act of a person that before a conversion or merger became effective was dissociated as a general partner from a converting or constituent limited partnership binds the converted or surviving organization after the conversion or merger becomes effective, if:
(1) before the conversion or merger became effective, the act would have bound the converting or constituent limited partnership under Section 10A-9A-4.02 if the person had been a general partner; and
(2) at the time the third party enters into the transaction, the third party:
(A) does not have notice of the dissociation;
(B) does not have notice of the conversion or merger; and
(C) reasonably believes that the converted or surviving organization is the converting or constituent limited partnership and that the person is a general partner in the converting or constituent limited partnership.
(c) If a person having knowledge of the conversion or merger causes a converted or surviving organization to incur an obligation under subsection (a) or (b), the person is liable:
(1) to the converted or surviving organization for any damage caused to the organization arising from the obligation; and
(2) if another person is liable for the obligation, to that other person for any damage caused to that other person arising from the liability.
(Act 2016-379, §1.)
This article is not exclusive. This article does not preclude an entity from being converted or merged under law other than this chapter.
(Act 2016-379, §1.)
(a) Beginning January 1, 2017, this chapter governs all limited partnerships and all foreign limited partnerships.
(b) With respect to a limited partnership formed before January 1, 2010, the following rules apply except as the partners otherwise elect in the manner provided in the partnership agreement or by law for amending the partnership agreement:
(1) Section 10A-1-3.03 does not apply and the limited partnership has whatever duration it had under the law applicable immediately before January 1, 2010.
(2) The limited partnership is not required to amend its certificate of formation to comply with Section 10A-9A-2.01(a)(5); but once amended or restated, the certificate of formation must comply with Section 10A-9A-2.01(a)(5).
(3) Sections 10A-9A-6.01 and 10A-9A-6.02 do not apply and a limited partner has the same right and power to dissociate from the limited partnership, with the same consequences, as existed immediately before January 1, 2010.
(4) Section 10A-9A-6.03(4) does not apply.
(5) Section 10A-9A-6.03(5) does not apply and a court has the same power to expel a general partner as the court had immediately before January 1, 2010.
(6) Section 10A-9A-8.01(c) does not apply and the connection between a person’s dissociation as a general partner and the dissolution of the limited partnership is the same as existed immediately before January 1, 2010.
(c) With respect to limited partnerships formed before January 1, 2017:
(1) the limited partnership’s formation document, whether a certificate of limited partnership or a certificate of formation is deemed to be the limited partnership’s certificate of formation; and
(2) the limited partnership’s partnership agreement is deemed the limited partnership’s partnership agreement.
(d) With respect to a limited partnership formed before October 1, 1998, the term “partnership agreement” as defined in Section 10A-9A-1.02(10), includes the certificate of partnership.
(Act 2016-379, §1.)
If any provision of this chapter or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this chapter which can be given effect without the invalid provision or application, and to this end the provisions of this chapter are severable.
(Act 2016-379, §1.)
This chapter modifies, limits, or supersedes the federal Electronic Signatures in Global and National Commerce Act, 15 U.S.C. Section 7001 et seq., but this chapter does not modify, limit, or supersede Section 101(c) of that act or authorize electronic delivery of any of the notices described in Section 103(b) of that act.
(Act 2016-379, §1.)
This chapter takes effect January 1, 2017.
(Act 2016-379, §1.)
Effective January 1, 2017, the following parts of the Code of Alabama 1975 are repealed: Sections 10A-9-1.01 to 10A-9-12.08, inclusive, as amended and in effect immediately before the effective date of this act.
(Act 2016-379, §1.)
This chapter does not affect an action commenced, proceeding brought, or right accrued before this chapter takes effect.
(Act 2016-379, §1.)
For purposes of income taxation, other than under Chapter 14A of Title 40, a domestic or foreign limited partnership or limited liability limited partnership shall be treated as a partnership unless it is classified otherwise for federal income tax purposes, in which case it shall be classified in the same manner as it is for federal income tax purposes.
(Act 2016-379, §1.)
This chapter and the provisions of Chapter 1 to the extent applicable to real estate investment trusts may be cited as the “Alabama Real Estate Investment Trust Law.”
(Acts 1995, No. 95-628, p. 1317, §1; §10-13-1; amended and renumbered by Act 2009-513, p. 967, §308.)
As used in this chapter, unless the context otherwise requires, the following words shall have the meanings respectively ascribed to them:
(1) REAL ESTATE INVESTMENT TRUST. An unincorporated trust or association in which property is acquired, held, managed, administered, controlled, invested, or disposed of for the benefit and profit of any person who may become a shareholder or an entity that otherwise complies with the provisions of 26 U.S.C. Sections 856 to 860, inclusive, of the U.S. Internal Revenue Code, as amended from time to time, and the rulings and regulations adopted thereunder.
(2) SHARE. A transferable unit of beneficial interest in a real estate investment trust.
(3) SHAREHOLDER. The holder of a transferable unit of beneficial interest in a real estate investment trust.
(Acts 1995, No. 95-628, p. 1317, §2; §10-13-2; amended and renumbered by Act 2009-513, p. 967, §308.)
A real estate investment trust is a permitted form of unincorporated trust or association, and may conduct business in the state in accordance with this chapter and with Chapter 1.
(Acts 1995, No. 95-628, p. 1317, §3; §10-13-3; amended and renumbered by Act 2009-513, p. 967, §308.)
(a) This chapter does not limit present law as it applies to the creation of or doing business in the state by:
(1) A common-law trust.
(2) A business trust.
(3) A Massachusetts trust.
(b) To the extent any provision of this chapter is contrary to or inconsistent with 26 U.S.C. Sections 856 to 860, inclusive, of the U.S. Internal Revenue Code, as amended from time to time, or the rulings and regulations adopted under those sections, the latter shall prevail as to any real estate investment trust qualifying under those sections, rulings, and regulations.
(Acts 1995, No. 95-628, p. 1317, §4; §10-13-4; amended and renumbered by Act 2009-513, p. 967, §308.)
A real estate investment trust may not do business in the state until it complies with this chapter and, in the case of a foreign real estate investment trust, with Article 7 of Chapter 1.
(Acts 1995, No. 95-628, p. 1317, §5; §10-13-5; amended and renumbered by Act 2009-513, p. 967, §308.)
(a) A real estate investment trust organized under this chapter shall file its declaration of trust in the same manner as the certificate of formation of an Alabama domestic filing entity and shall be subject in all respects to the provisions of Article 4 of Chapter 1, governing filing of documents except as those provisions may be inconsistent with the provisions of this chapter.
(b) The declaration of trust shall:
(1) Indicate clearly that the trust is a real estate investment trust.
(2) State the name of the trust.
(3) State the total number of shares that the real estate investment trust has authority to issue.
(4) Provide for an annual meeting of shareholders after the delivery of the annual report, at a convenient location and on proper notice.
(5) Provide for the election of trustees at least every third year at an annual meeting of shareholders.
(6) State the number of trustees and the names of those persons who will serve as trustees until the first meeting of shareholders and until their successors are elected and qualified or at a later time as may be specified in the declaration of trust.
(7) State the name and address of a resident agent of the real estate investment trust in Alabama.
(8) If the shares are divided into classes as permitted by Section 10A-10-1.07, provide a description of each class, including any preferences, conversion, and other rights, voting powers, restrictions, limitations as to dividends or distributions, qualifications, and terms and conditions of redemption.
(c) Notwithstanding any provision of this chapter which requires for any action, the concurrence of a greater proportion of the votes than a majority of the votes entitled to be cast, a real estate investment trust may provide by its declaration of trust that the action may be taken or authorized on the concurrence of a smaller proportion, but not less than a majority of the number of votes entitled to be cast on the matter.
(d) The declaration of trust shall be signed and acknowledged by each trustee.
(Acts 1995, No. 95-628, p. 1317, §6; §10-13-6; amended and renumbered by Act 2009-513, p. 967, §308.)
(a) A real estate investment trust may provide by its declaration of trust any of the following:
(1) That any specified class of shares is preferred over another class as to its distributive share of the assets on voluntary or involuntary liquidation of the real estate investment trust and the amount of the preference.
(2) That any specified class of shares may be redeemed at the option of the real estate investment trust or of the holders of the shares and the terms and conditions of redemption, including the time and price of redemption.
(3) That any specified class of shares is convertible into shares of one or more classes and the terms and conditions of conversion.
(4) That the holders of any specified securities issued or to be issued by the real estate investment trust have any voting or other rights which, by law, are or may be conferred on shareholders.
(5) For any other preferences, rights, restrictions, including restrictions on transferability and qualifications not inconsistent with law.
(6) That the board of trustees may classify or reclassify any unissued shares, from time to time, by setting or changing the preferences, conversion, or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of the shares.
(7) That the board of trustees may amend the declaration of trust to increase or decrease the aggregate number of shares or the number of shares of any class that the trust has authority to issue.
(b) If, under a power contained in the declaration of trust, the board of trustees classifies or reclassifies any unissued shares by setting or changing the preferences, conversion, or other rights, voting powers, restrictions, limitations as to dividends or distributions, qualifications or terms or conditions of redemption, the board, before issuing any of the shares, shall deliver articles supplementary for record to the Secretary of State for filing, which shall include both of the following:
(1) A description of the shares, including the preferences, conversion, and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, as set or changed by the board of trustees.
(2) A statement that the shares have been classified or reclassified by the board of trustees under the authority contained in the declaration of trust.
(c) (1) For purposes of this subsection, “facts” include the occurrence of any event, including a determination or action by any person or body, including the real estate investment trust.
(2) Any of the preferences, conversion, or other rights, voting powers, restrictions, limitations as to dividends or distributions, qualifications, or terms or conditions of redemption of any class or series of shares may be made dependent upon facts ascertainable outside the declaration of trust and may vary among holders of the shares, provided, that the manner in which the facts or variations will operate upon the preferences, conversion, or other rights, voting powers, restrictions, limitations as to dividends or distributions, qualifications, or terms or conditions of redemption of the class or series of shares is clearly and expressly set forth in the declaration of trust.
(d) If the real estate investment trust has authority to issue shares of more than one class, the certificate evidencing the shares shall contain on its face or back a full statement or summary of:
(1) The designations and any preferences, conversion, and other rights, voting powers, restrictions, limitations as to dividends or distributions, qualifications, and terms and conditions of redemption of the shares of each class which the real estate investment trust is authorized to issue.
(2) If the real estate investment trust is authorized to issue any preferred or special class in series, both of the following:
a. The differences in the relative rights and preferences between the shares of each series to the extent they have been set.
b. The authority of the board of trustees to set the relative rights and preferences of subsequent series.
(e)(1) A summary of the information required by subsection (d), as included in a registration statement permitted to become effective under the Federal Securities Act of 1933, is an acceptable summary for the purposes of this section.
(2) Instead of a full statement or summary, the certificate may state that the real estate investment trust will furnish a full statement of the information required by subsection (d) to any holder of shares on request and without charge.
(f) Unless the declaration of trust provides otherwise, the trustees of a real estate investment trust may authorize the issue of some of the shares of any or all of its classes or series without certificates. The authorization does not affect shares already represented by certificates until they are surrendered to the real estate investment trust. At the time of issuance or transfer of any shares without certificates, the real estate investment trust shall send the shareholder a written statement of the information required on certificates by subsection (d) or (e).
(Acts 1995, No. 95-628, p. 1317, §7; §10-13-7; amended and renumbered by Act 2009-513, p. 967, §308; Act 2020-73, §10.)
Unless the declaration of trust provides otherwise, the shareholders of a real estate investment trust may remove any trustee with or without cause by the affirmative vote of a majority of all the votes entitled to be cast for the election of trustees.
(Acts 1995, No. 95-628, p. 1317, §8; §10-13-8; amended and renumbered by Act 2009-513, p. 967, §308.)
A real estate investment trust has the power to:
(1) Unless the declaration of trust provides otherwise, have perpetual existence unaffected by any rule against perpetuities.
(2) Sue, be sued, complain, and defend in all courts.
(3) Transact its business, carry on its operations, and exercise the powers granted by this chapter in any state, territory, district, or possession of the United States and in any foreign country.
(4) Make contracts, incur liabilities, and borrow money.
(5) Sell, mortgage, lease, pledge, exchange, convey, transfer, and otherwise dispose of all or any part of its assets.
(6) Issue bonds, notes, and other obligations, and secure them by mortgage or deed of trust of all or any part of its assets.
(7) Subject to Section 10A-10-1.10, acquire by purchase, or in any other manner, take, receive, own, hold, use, employ, improve, encumber, and otherwise deal with any interest in real and personal property, wherever located.
(8) Purchase, take, receive, subscribe for, or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, loan, pledge, or otherwise dispose of and deal with:
a. Securities, shares, and other interests in any obligations of domestic and foreign corporations, other real estate investment trusts, associations, partnerships, and individuals.
b. Direct and indirect obligations of the United States, any other government, state, territory, government district, and municipality, and any of their instrumentalities.
(9) Elect or appoint trustees, officers, and agents of the trust for the period of time the declaration of trust or bylaws provide, define their duties, and determine their compensation.
(10) Adopt and implement employee or officer benefit plans.
(11) Make and alter bylaws not inconsistent with law or with its declaration of trust to regulate the government of the real estate investment trust and the administration of its affairs.
(12) Exercise these powers, including the power to take, hold, and dispose of the title to real and personal property in the name of the trust or in the name of its trustees, without the filing of any bond.
(13) Generally exercise the powers set forth in its declaration of trust which are not inconsistent with law and are appropriate to promote and attain the purposes set forth in its declaration of trust.
(14) Indemnify or advance expenses to trustees, officers, employees, and agents of the trust to the same extent as permitted for directors, officers, employees, and agents of an Alabama corporation under the Alabama Business Corporation Law.
(Acts 1995, No. 95-628, p. 1317, §9; §10-13-9; amended and renumbered by Act 2009-513, p. 967, §308; Act 2019-94, §2.)
(a) A real estate investment trust shall hold, either directly or through other entities, assets of such character, in such percentages, and for such uses as permitted by Sections 856 to 860, inclusive, of the Internal Revenue Code, as amended from time to time.
(b) Except as provided in subsection (a), the trustees shall have the powers as to the investment of the trust estate as may be set out in the declaration of trust without regard to the type of investments to which trustees generally are restricted.
(Acts 1995, No. 95-628, p. 1317, §10; §10-13-10; amended and renumbered by Act 2009-513, p. 967, §308.)
(a) Each year, a real estate investment trust doing business in this state shall prepare an annual report of its operations. The report shall include a balance sheet, an income statement, and a surplus statement.
(b) The financial statements in the annual report shall be certified by an independent certified public accountant based on the accountant’s full examination of the books and records of the real estate investment trust in accordance with generally accepted auditing procedures.
(c) The annual report shall be submitted to shareholders at or before the annual meeting of shareholders.
(d) A real estate investment trust shall mail the annual financial statements to each shareholder within 120 days after the close of each fiscal year. Thereafter, on written request from a shareholder who was not mailed the statements, the real estate investment trust shall mail to him or her the latest financial statements.
(Acts 1995, No. 95-628, p. 1317, §11; §10-13-11; amended and renumbered by Act 2009-513, p. 967, §308.)
A shareholder has the same right to inspect the records of the real estate investment trust as a shareholder of a corporation under the Alabama Business Corporation Law.
(Acts 1995, No. 95-628, p. 1317, §12; §10-13-12; amended and renumbered by Act 2009-513, p. 967, §308; Act 2019-94, §2.)
(a) A real estate investment trust shall pay the filing fees required under Section 10A-1-4.31.
(b) In computing fees under this section, a real estate investment trust shall treat its declaration of trust in the same manner as a certificate of formation.
(Acts 1995, No. 95-628, p. 1317, §13; §10-13-13; amended and renumbered by Act 2009-513, p. 967, §308.)
(a) Except as provided in subsection (c) of Section 10A-10-1.06 or subdivision (7) of subsection (a) of Section 10A-10-1.07, a declaration of trust may be amended only as provided in this section.
(b) The board of trustees of a real estate investment trust proposing an amendment to its declaration of trust shall:
(1) Adopt a resolution which sets forth the proposed amendment and declares that it is advisable.
(2) Direct that the proposed amendment be submitted for consideration at either an annual or special meeting of the shareholders.
(c) Notice which states that a purpose of the meeting will be to act upon the proposed amendment shall be given by the real estate investment trust in the manner provided in the declaration of trust or bylaws to:
(1) Each shareholder entitled to vote on the proposed amendment.
(2) Each shareholder not entitled to vote on the proposed amendment if the contract rights of the shareholder’s shares, as expressly set forth in the declaration of trust, would be altered by the amendment.
(3) The notice shall include a copy of the amendment or a summary of the changes it will affect.
(d) The proposed amendment shall be approved by the shareholders of the real estate investment trust by the affirmative vote of two-thirds of all the votes entitled to be cast in the matter.
(e) A declaration of trust may permit the trustees by a two-thirds vote to amend provisions of the declaration of trust, from time to time, to qualify as a real estate investment trust under the Internal Revenue Code or under this chapter.
(f) A certificate of amendment setting forth the amendment and stating the manner in which it was adopted shall be signed and acknowledged by at least a majority of the trustees or an officer duly authorized by at least a majority of the trustees and deliver the certificate of amendment to the Secretary of State for filing.
(Acts 1995, No. 95-628, p. 1317, §14; §10-13-14; amended and renumbered by Act 2009-513, p. 967, §308; Act 2020-73, §10.)
(a) For purposes of this section, the following words shall have the respective meanings ascribed to them:
(1) ALABAMA REAL ESTATE INVESTMENT TRUST. A real estate investment trust organized in compliance with the provisions of this chapter.
(2) BUSINESS TRUST.
a. An entity described in Section 10A-16-1.01.
b. An unincorporated trust or association, including an Alabama real estate investment trust, a common-law trust, or a Massachusetts trust, which is engaged in business and in which property is acquired, held, managed, administered, controlled, invested, or disposed of for the benefit and profit of any person who may become a holder of a transferable unit of beneficial interest in the trust.
(3) DOMESTIC LIMITED LIABILITY COMPANY. A limited liability company as defined under the Alabama Limited Liability Company Law.
(4) DOMESTIC LIMITED PARTNERSHIP. A limited partnership as defined under the Alabama Limited Partnership Law.
(5) FOREIGN BUSINESS TRUST. A business trust organized under the laws of the United States, another state of the United States, or a territory, possession, or district of the United States.
(6) FOREIGN LIMITED LIABILITY COMPANY. A limited liability company formed under the laws of any state other than the State of Alabama or under the laws of a foreign country or other foreign jurisdiction and denominated as such under the laws of such state, foreign country, or other foreign jurisdiction.
(7) FOREIGN LIMITED PARTNERSHIP. A limited partnership formed under the laws of any state other than the State of Alabama or under the laws of a foreign country or other foreign jurisdiction and denominated as such under the laws of such state, foreign country, or other foreign jurisdiction.
(b) Unless the declaration of trust provides otherwise, an Alabama real estate investment trust may merge into an Alabama or foreign business trust, into an Alabama or foreign corporation having capital stock, or into a domestic or foreign limited partnership or limited liability company; or one or more business trusts, corporations, domestic or foreign limited partnerships, or limited liability companies may merge into an Alabama real estate investment trust.
(c) A merger shall be approved in the manner provided by this section, except that:
(1) A foreign business trust, an Alabama business trust, other than an Alabama real estate investment trust, a corporation, a domestic or foreign limited partnership, or a domestic or foreign limited liability company party to the merger shall have the merger advised, authorized, and approved in the manner and by the vote required by its declaration of trust, charter, or partnership agreement, and the laws of the place where it is organized.
(2) A merger needs to be approved by an Alabama real estate investment trust successor only by a majority of its entire board of trustees if:
a. The merger does not reclassify or change its outstanding shares or otherwise amend its declaration of trust.
b. The number of shares to be issued or delivered in the merger is not more than 15 percent of the number of its shares of the same class or series outstanding immediately before the merger becomes effective.
(d) The board of trustees of each Alabama real estate investment trust proposing to merge shall:
(1) Adopt a resolution that declares the proposed transaction is advisable in substantially the terms and conditions set forth or referred to in the resolution.
(2) Direct that the proposed transaction be submitted for consideration at either an annual or special meeting of shareholders.
(e) Notice which states that a purpose of a meeting will be to act upon the proposed merger shall be given by each Alabama real estate investment trust in the manner provided for corporations by the Alabama Business Corporation Law, to:
(1) Each of its shareholders entitled to vote on the proposed transaction.
(2) Each of its shareholders not entitled to vote on the proposed transaction, except the shareholders of a successor in a merger if the merger does not alter the contract rights of their shares as expressly set forth in the declaration of trust.
(f) Except as provided in subsection (c) of Section 10A-10-1.06, the proposed merger shall be approved by the shareholders of each Alabama real estate investment trust by the affirmative vote of two-thirds of all the votes entitled to be cast on the matter.
(g) Articles of merger containing the information required by the Alabama Business Corporation Law and the other provisions as permitted by that section shall be:
(1) Executed for each party to the articles of merger in the manner required by the Alabama Business Corporation Law.
(2) Filed for the record in the Office of the Secretary of State in accordance with the provisions of Article 4 of Chapter 1.
(h)(1) A proposed merger may be abandoned before the effective date of the articles of merger:
a. If the articles of merger so provide, by majority vote of the entire board of trustees of any one business trust party to the articles or by a majority of the entire board of directors of any one corporation party to the articles.
b. Unless the articles of merger provide otherwise, by a majority vote of the entire board of trustees of each Alabama real estate investment trust party to the articles.
c. By unanimous consent of the members of a limited liability company party to the articles of merger.
d. By unanimous consent of the partners of a limited partnership party to the articles of merger.
(2) If the articles of merger have been filed in the Office of the Secretary of State, notice of the abandonment shall be given promptly to the Secretary of State.
(3)a. If the proposed merger is abandoned as provided in this subsection, no legal liability arises under the articles of merger.
b. An abandonment does not prejudice the rights of any person under any other contract made by a business trust, corporation, limited partnership, or limited liability company party to the proposed articles of merger in connection with the proposed merger.
c. Each shareholder of an Alabama real estate investment trust objecting to a merger of the Alabama real estate investment trust shall have the same rights as a stockholder of an Alabama corporation under Article 13 of Chapter 2A and under the same procedures.
(i) The Secretary of State shall prepare certificates of merger that specify:
(1) The name of each party to the articles of merger.
(2) The name of the successor and the location of its principal office in this state or, if it has none, its principal place of business.
(3) The time the articles of merger are accepted for record by the Secretary of State.
(j) If the successor in a merger is an Alabama real estate investment trust, a merger is effective as of the later of:
(1) The time the Secretary of State accepts the articles of merger for record.
(2) The time established under the articles of merger, not to exceed 30 days after the articles are accepted for record.
(k)(1) If the successor in a merger is a foreign corporation, a foreign limited partnership, a foreign limited liability company, or an Alabama or foreign business trust, other than an Alabama real estate investment trust, the merger is effective as of the later of:
a. The time specified by the law of the place where the successor is organized.
b. The time the Secretary of State accepts the articles of merger for record.
(2) A foreign successor in a merger may deliver for filing to the Secretary of State a certificate which certifies the date the articles of merger were filed. However, the failure to file this certificate does not invalidate the merger.
(l)(1) Consummation of a merger has the effects provided in this subsection.
(2) The separate existence of each business trust, corporation, limited partnership, or limited liability company party to the articles of merger, except the successor, ceases.
(3) The shares of each business trust party to the articles of merger which are to be converted or exchanged under the terms of the articles cease to exist, subject to the rights of an objecting shareholder under this section.
(4) In addition to any other purposes and powers set forth in the articles, if the articles of merger provide, the successor has the purposes and powers of each party to the articles.
(5)a. The assets of each party to the articles of merger, including any legacies which it would have been capable of taking, vest in and devolve on the successor without further act or deed.
b. Confirmatory deeds, assignments, or similar instruments to evidence the merger may be executed and delivered at any time in the name of either party to the articles of merger. A certified copy of any document required to be filed under this section may be filed in the real estate records in the office of the judge of probate in any county in which the nonsuccessor party owned real property, without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate, however, may collect a filing fee of five dollars ($5). Any such filing shall evidence chain of title, but lack of filing shall not affect the converted entity’s title to the real property.
(6)a. The successor is liable for all the debts and obligations of each nonsurviving party to the articles of merger. An existing claim, action, or proceeding pending by or against any nonsurviving party to the articles of merger may be prosecuted to judgment as if the merger had not taken place, or, on motion of the successor or any party, the successor may be substituted as a party and the judgment against the nonsurviving party to the articles of merger constitutes a lien on the property of the successor.
b. A merger does not impair the rights of creditors or any liens on the property of any business trust, corporation, limited partnership, or limited liability company which is a party to the articles of merger.
(m) This section is not exclusive. Real estate investment trusts may merge or exchange their shares in any other manner provided by law, including pursuant to the provisions of Article 8 of Chapter 1.
(Acts 1995, No. 95-628, p. 1317, §15; §10-13-15; amended and renumbered by Act 2009-513, p. 967, §308; Act 2019-94, §2; Act 2020-73, §10.)
(a) A real estate investment trust may terminate its existence by voluntary dissolution and wind up its business and affairs in the manner and on the grounds provided in the Alabama Business Corporation Law.
(b) A real estate investment trust may curtail or cease its trust activities by partially or completely distributing its assets.
(c)(1) The Attorney General may institute proceedings to dissolve a real estate investment trust which has abused, misused, or failed to use its powers. The proceedings shall be brought in the manner and on the grounds provided in the Alabama Business Corporation Law, with respect to judicial dissolution of a corporation.
(2) The venue of an action under this subsection is in a county where an officer or resident agent of the real estate investment trust is located.
(Acts 1995, No. 95-628, p. 1317, §16; §10-13-16; amended and renumbered by Act 2009-513, p. 967, §308; Act 2019-94, §2.)
The liability of a real estate investment trust extends to as much of the trust estate, including the whole, as necessary to discharge the liability.
(Acts 1995, No. 95-628, p. 1317, §17; §10-13-17; amended and renumbered by Act 2009-513, p. 967, §308.)
No holder of the shares of, or beneficial interest in, a real estate investment trust shall be personally liable for any liabilities, duties or obligations of, or claims against, the real estate investment trust, whether arising before or after the holder became the owner or holder of the shares or beneficial interest.
(Acts 1995, No. 95-628, p. 1317, §18; §10-13-18; amended and renumbered by Act 2009-513, p. 967, §308.)
(a) Subject to the provisions of subsection (b), a trustee of a real estate investment trust is not personally liable for the obligations of the real estate investment trust.
(b) If a trustee otherwise would be liable, the provisions of this subsection do not relieve the trustee from any liability to the trust or its security holders for any act that constitutes:
(1) Bad faith.
(2) Willful misfeasance.
(3) Gross negligence.
(4) Reckless disregard of the trustee’s duties.
(c)(1) Except as provided in subdivision (2), the declaration of trust of a real estate investment trust may include any provision expanding or limiting the liability of its trustees and officers to the trust or its shareholders for money damages.
(2) The declaration of trust of a real estate investment trust may not include any provision that restricts or limits the liability of its trustees or officers to the trust or its shareholders:
a. To the extent that it is proven that the person actually received an improper benefit or profit in money, property, or services, for the amount of the benefit or profit in money, property, or services actually received.
b. To the extent that a judgment or other final adjudication adverse to the person is entered in a proceeding based on a finding in the proceeding that the person’s action or failure to act was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding.
(3) This subsection may not be construed to affect the liability of a person in any capacity other than the person’s capacity as a trustee or officer of a real estate investment trust.
(Acts 1995, No. 95-628, p. 1317, §19; §10-13-19; amended and renumbered by Act 2009-513, p. 967, §308.)
In an action against a real estate investment trust doing business in the state, process shall be served on any officer or resident agent of the real estate investment trust or by any method permitted under Section 10A-1-5.31, 10A-1-5.35, or 10A-1-5.36, and any notice or demand permitted or required by law may be served in like manner.
(Acts 1995, No. 95-628, p. 1317, §20; §10-13-20; amended and renumbered by Act 2009-513, p. 967, §308.)
(a) A real estate investment trust shall be subject to the tax imposed by Section 40-18-31, provided, that for purposes of Section 40-18-33, the “net income” of a real estate investment trust shall mean “real estate investment trust taxable income” as defined in 26 U.S.C. Section 857 as in effect from time to time.
(b) Solely for purposes of conforming federal law with Alabama law, the “net income” of a real estate investment trust determined pursuant to subsection (a) shall be further adjusted as follows:
(1) The deduction for intercorporate dividends received under Section 40-18-35(a) (7), shall not be allowed.
(2) The deduction for dividends paid, as defined in 26 U.S.C. Section 561, shall be allowed but (i) shall be computed without regard to that portion of the deduction which is attributable to the amount equal to the net income from foreclosure property as defined in 26 U.S.C. Section 857, and (ii) shall be limited by the provisions of Section 40-18-35(c). The dividends received deduction for dividends received from a Captive REIT shall be limited as provided in Section 40-18-35(a)(7)d.
(3) The net income shall be computed without regard to application by Section 40-18-13, or 26 U.S.C. Section 443(b), relating to computation of tax on change of annual accounting period.
(4) There shall be deducted an amount equal to the tax imposed for the taxable year by 26 U.S.C. Section 857(b) (5), as in effect from time to time.
(5) There shall be excluded an amount equal to any net income derived from prohibited transactions as defined in 26 U.S.C. Section 857, and no deduction shall be allowed for the federal tax equal to 100 percent of the net income derived from the prohibited transactions.
(c) In computing the tax imposed by this section, “qualified REIT subsidiaries” of a real estate investment trust shall be treated in accordance with 26 U.S.C. Section 856(i), as amended, from time to time, and the rulings and regulations adopted hereunder.
(d) For purposes of determining the source of income from distributions of a real estate investment trust to its shareholders, the income shall not be construed to arise from sources within Alabama merely because the title and ownership of the real estate investment trust property or the evidence thereof is vested in a real estate investment trust organized under this chapter.
(e) The Commissioner of Revenue shall adopt the rulings and regulations necessary to conform the treatment of real estate investment trusts to the applicable provisions of Title 26 of the United States Code, as amended from time to time.
(Acts 1995, No. 95-628, p. 1317, §21; Act 2008-543, p. 1175, §1; §10-13-21; amended and renumbered by Act 2009-513, p. 967, §308.)
Reserved.
A domestic or foreign corporation or any “qualified REIT subsidiary” of the domestic or foreign corporation as defined in 26 U.S.C. Section 856(i), otherwise in compliance with the provisions of Chapters 1 and 2, that elects to be treated as a real estate investment trust under 26 U.S.C. Section 856, as amended from time to time, shall compute its Alabama income tax in accordance with Section 10A-10-1.21.
(Acts 1995, No. 95-628, p. 1317, §23; §10-13-23; amended and renumbered by Act 2009-513, p. 967, §310.)
Distributions made from ordinary income by a real estate investment trust are income. All other distributions made by the trust, including distributions from capital gains, depreciation, or depletion, whether in the form of cash or an option to take new stock or cash or an option to purchase additional shares, are principal.
(Acts 1995, No. 95-628, p. 1317, §24; §10-13-24; amended and renumbered by Act 2009-513, p. 967, §310.)
This chapter and the provisions of (A) Chapter 1 and (B) Chapter 2 or Chapter 2A, as applicable, to the extent applicable to employee cooperative associations may be cited as the Alabama Employee Cooperative Corporations Law.
(Act 97-949, p. 524, §1; §10-14-1; amended and renumbered by Act 2009-513, p. 967, §312; Act 2019-94, §2.)
As used in this chapter, the following words shall have the following meanings:
(1) COLLECTIVE RESERVE ACCOUNT. An internal capital account that represents the portion of the net book value of the corporation attributable to the cooperative.
(2) EMPLOYEE COOPERATIVE. A corporation which has elected to be governed by this chapter.
(3) INTERNAL CAPITAL ACCOUNT COOPERATIVE. An employee cooperative governed in accordance with Section 10A-11-1.11.
(4) INTERNAL CAPITAL ACCOUNTS. A system of accounts on the books of an employee cooperative that reflects the book value of the corporation.
(5) MEMBER. A natural person who has been accepted for membership in and owns a membership share issued by an employee cooperative.
(6) MEMBERSHIP FEE. The consideration paid for a membership share.
(7) MEMBERSHIP SHARE. A single share of voting stock issued to each member of a worker cooperative as evidence of membership.
(8) PATRONAGE. The amount of work performed as a member of an employee cooperative, measured in accordance with the governing documents.
(9) WRITTEN NOTICE OF ALLOCATION. A written statement which discloses to a member the stated dollar amount of the member’s patronage allocation and the terms for payment of that amount by the employee cooperative.
(Act 97-949, p. 524, §2; §10-14-2; amended and renumbered by Act 2009-513, p. 967, §312.)
Any corporation governed by the Alabama Business Corporation Law may elect to be governed as an employee cooperative under this chapter, by so stating in its certificate of formation or certificate of amendment filed in accordance with the Alabama Business Corporation Law.
(Act 97-949, p. 524, §3; §10-14-3; amended and renumbered by Act 2009-513, p. 967, §312; Act 2019-94, §2.)
An employee cooperative may revoke its election under this chapter by a vote of two-thirds of the members and through articles of amendment filed in accordance with the Alabama Business Corporation Law.
(Act 97-949, p. 524, §4; §10-14-4; amended and renumbered by Act 2009-513, p. 967, §312; Act 2019-94, §2.)
An employee cooperative may include the word “cooperative” or “co-op” in its corporate name, provided, however, that the name shall not include the words “electric” or “power”.
(Act 97-949, p. 524, §5; §10-14-5; amended and renumbered by Act 2009-513, p. 967, §312.)
(a) The governing documents shall establish qualifications and the method of acceptance and termination of members. No person may be accepted as a member unless employed by the employee cooperative on a full-time or part-time basis. In order to qualify for membership, part-time employment shall be at least half-time.
(b) An employee cooperative shall issue a class of voting stock designated as “membership shares.” Each member shall own only one membership share, and only members may own such shares.
(c) Membership shares shall be issued for a fee as shall be determined by the directors. An employee cooperative may allow for payment of such fee by payroll deduction, installments, or similar methods. A membership share may be issued to a person upon acceptance for membership regardless of whether the membership fee is fully paid.
(d) Members of an employee cooperative shall have all the rights and responsibilities of stockholders of a corporation governed by the Alabama Business Corporation Law, except as otherwise provided in this chapter.
(Act 97-949, p. 524, §6; §10-14-6; amended and renumbered by Act 2009-513, p. 967, §312; Act 2019-94, §2.)
(a) The bylaws of an employee cooperative shall provide for the election, terms, classification, if any, and removal of directors and officers.
(b) Nonmembers may serve as directors or officers of an employee cooperative but at no time shall the number of nonmember directors or officers exceed 25 percent of the total number of directors or officers.
(c) Vacancies in director positions resulting from death, resignation, or removal shall be filled by vote of the member directors or by vote of the members.
(Act 97-949, p. 524, §7; §10-14-7; amended and renumbered by Act 2009-513, p. 967, §312.)
(a) No capital stock other than membership shares shall be given voting power in an employee cooperative, except as otherwise provided in this chapter.
(b) Notwithstanding any other provision of law, the power to amend or repeal bylaws of an employee cooperative shall be vested in the members only.
(c) Amendments adversely affecting the rights of members may not be adopted without the vote of the members, except that the protection of this subsection may be extended to stockholders in the case of employee cooperative corporations that have not elected to operate as an internal capital account cooperative.
(Act 97-949, p. 524, §8; §10-14-8; amended and renumbered by Act 2009-513, p. 967, §312.)
(a) The net earnings or losses of an employee cooperative shall be apportioned and distributed at such times and in such manner as the governing documents specify. Net earnings declared as patronage allocations with respect to a period of time, and paid or credited to members, shall be apportioned among the members in accordance with the ratio which each member’s patronage during the period involved bears to total patronage by all members during that period.
(b) The apportionment, distribution, and payment of net earnings required by subsection (a) may be in cash, credits, written notices of allocation, or capital stock issued by the employee cooperative.
(Act 97-949, p. 524, §9; §10-14-9; amended and renumbered by Act 2009-513, p. 967, §312.)
(a) Any employee cooperative may establish through its governing documents a system of internal capital accounts, to reflect the book value and to determine the redemption price of membership shares, capital stock, and written notices of allocation.
(b) The governing documents of an employee cooperative may permit the periodic redemption of written notices of allocation and capital stock, and shall provide for recall and redemption of the membership share upon termination of membership in the cooperative. No redemption shall be made if the redemption would result in the liability of any director or officer of the employee cooperative.
(c) The governing documents may provide for the employee cooperative to pay or credit interest on the balance in each member’s internal capital account.
(d) The governing documents may authorize assignment of a portion of retained net earnings and net losses to a collective reserve account. Earnings assigned to the collective reserve account may be used for any and all corporate purposes as determined by the board of directors.
(Act 97-949, p. 524, §10; §10-14-10; amended and renumbered by Act 2009-513, p. 967, §312.)
(a) An internal capital account cooperative is a worker cooperative whose entire net book value is reflected in internal capital accounts, one for each member, and a collective reserve account, and in which no persons other than members own capital stock. In an internal capital account cooperative, each member shall have one and only one vote in any matter requiring voting by stockholders.
(b) An internal capital account cooperative shall credit the paid-in membership fee and additional paid-in capital of a member to the member’s internal capital account and shall also record the apportionment of retained net earnings or net losses to the members in accordance with patronage by appropriately crediting or debiting the internal capital accounts of members. The collective reserve account in an internal capital account cooperative shall reflect any paid-in capital, net losses, and retained net earnings not allocated to individual members.
(c) In an internal capital account cooperative, the balance in all the individual internal accounts and collective reserve account, if any, shall be adjusted at the end of each accounting period so that the sum of the balances is equal to the net book value of the employee cooperative.
(Act 97-949, p. 524, §11; §10-14-11; amended and renumbered by Act 2009-513, p. 967, §312.)
(a) When an employee cooperative revokes its election in accordance with Section 10A-11-1.04, the certificate of amendment shall provide for conversion of membership shares and internal capital accounts or their conversion to securities or other property in a manner consistent with the Alabama Business Corporation Law.
(b) An employee cooperative which has not revoked its election under this chapter may not consolidate or merge with another corporation other than an employee cooperative. Two or more employee cooperatives may consolidate or merge in accordance with the Alabama Business Corporation Law.
(Act 97-949, p. 524, §12; §10-14-12; amended and renumbered by Act 2009-513, p. 967, §312; Act 2019-94, §2.)
A business trust is an express trust created by a written declaration of trust whereby property is conveyed to one or more trustees, who hold and manage the same for the benefit and profit of such persons as may be or become the holders of transferable certificates evidencing the beneficial interest in the trust estate.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §1; §19-3-60; amended and renumbered by Act 2009-513, p. 967, §318.)
A business trust may be established by a declaration of trust, duly executed by one or more trustees, for any lawful purpose including, but not limited to, acquiring, managing, improving, leasing, dealing in, selling, or otherwise alienating, mortgaging, or otherwise incumbering real and personal property of all kinds and descriptions, including dealing in, purchasing, holding, selling, and exchanging stocks, bonds, mortgages, deeds of trust, and other securities of all kinds and descriptions; receiving the income, dividends, rents, profits, and returns therefrom, and investing the same or distributing the same to the beneficial owners of the trust in accordance with the terms of the declaration of trust.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §2; §19-3-61; amended and renumbered by Act 2009-513, p. 967, §318.)
The trustees shall hold the legal title to all property at any time belonging to the business trust. They shall have control over the property as well as the control and management of the business and affairs of the business trust. Liability to third persons for any act, omission, or obligation of a trustee of a business trust, when acting in such capacity, shall extend to the whole of the trust estate, or so much thereof as may be necessary to discharge such obligation, but no trustee shall be personally liable for any such act, omission, or obligation. The trustees shall have the powers as to the investment of the trust estate as may be set out in the declaration of trust without regard to the type of investments to which trustees generally are restricted by the provisions of Article 6 of Chapter 3 of Title 19 or otherwise.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §3; §19-3-62; amended and renumbered by Act 2009-513, p. 967, §318.)
The beneficial ownership in a business trust may be evidenced by certificates issued by the trustees. These beneficial interests, whether certificated or uncertificated, shall be transferable in the same manner as stock of a corporation is transferable. No assessment shall be made against the interest of any beneficial owner, and no beneficial owner shall be personally liable for any debts or liabilities incurred by the trustees or by the business trust.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §4; §19-3-63; amended and renumbered by Act 2009-513, p. 967, §318.)
(a) The written declaration of trust may provide for the election of successor trustees in the event of the death, resignation, and removal of a trustee and may provide for the amendment of the declaration of trust. The declaration of trust may also contain other provisions regarding the operation and administration of the business trust as may be necessary or desirable.
(b) The declaration of trust shall be delivered to the Secretary of State for filing, accompanied by the filing fee in the amount prescribed by Chapter 1 for a certificate of formation.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §5; §19-3-64; amended and renumbered by Act 2009-513, p. 967, §318; Act 2020-73, §10.)
A business trust shall not be deemed invalid as violating the rule against perpetuities or the law against suspension of the powers of alienation. Such trust may continue for the time as may be necessary to accomplish the purposes for which it may be created, provided the declaration of trust contains a provision that the trust may be terminated at any time by action of the trustees or by the vote of a specified percentage in interest of the beneficial owners thereof as set forth in the declaration of trust.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §6; §19-3-65; amended and renumbered by Act 2009-513, p. 967, §318.)
A business trust may be sued for debts and other obligations incurred by the trustees in the performance of their duties under the declaration of trust and for any damages resulting from the negligence of the trustees, and its property shall be subject to attachment and execution in like manner as if it were a corporation.
(Acts 1961, Ex. Sess., No. 251, p. 2263, §7; §19-3-66; amended and renumbered by Act 2009-513, p. 967, §318.)
This chapter together with applicable provisions of Chapter 1 may be cited as the Alabama Unincorporated Nonprofit Association Law.
(Acts 1995, No. 95-527, p. 1064, §1; §10-3B-1; amended and renumbered by Act 2009-513, p. 967, §320.)
In this chapter:
(1) MEMBER means a person who, under the rules or practices of a nonprofit association, may participate in the selection of persons authorized to manage the affairs of the nonprofit association or in the development of policy of the nonprofit association.
(2) NONPROFIT ASSOCIATION means an unincorporated organization consisting of two or more members joined by mutual consent as an association for a stated common, nonprofit purpose, but does not include a limited liability company, general partnership, or limited partnership. In addition, joint tenancy, tenancy in common, or tenancy by the entireties does not by itself establish a nonprofit association, even if the co-owners share use of the property for a nonprofit purpose.
(3) NONPROFIT PURPOSE shall be any purpose for which a nonprofit corporation could be organized under the Alabama Nonprofit Corporation Law, as amended, and where no part of income or profit is distributable to its members, directors, and officers.
(Acts 1995, No. 95-527, p. 1064, §2; §10-3B-2; amended and renumbered by Act 2009-513, p. 967, §320; Act 2018-125, §6; Act 2026-495, §1.)
Principles of law and equity supplement this chapter unless specifically displaced by a particular provision of it.
(Acts 1995, No. 95-527, p. 1064, §3; §10-3B-3; amended and renumbered by Act 2009-513, p. 967, §320.)
(a) A nonprofit association may adopt written rules for its regulation, management, governance and dissolution.
(b) As to matters not addressed by written rules, the following rules shall apply:
(1) A member of a nonprofit association shall be entitled to participate in the governance of the association. A majority of the votes cast on a matter by members present and voting at a properly called meeting shall govern as to that matter.
(2) As to any matter not determined by vote, the association may take action in accordance with its settled practices.
(c) A member acting on behalf of the association shall discharge his or her duties in a manner the member reasonably believes to be in the best interest of the association.
(Acts 1995, No. 95-527, p. 1064, §4; §10-3B-4; amended and renumbered by Act 2009-513, p. 967, §320.)
(a) Unless prohibited or otherwise limited by its written rules or governing documents, a nonprofit association in its name may acquire, hold, encumber, or transfer an estate or interest in real or personal property.
(b) Unless prohibited or otherwise limited by its written rules or governing documents, a nonprofit association may be a legatee, devisee, or beneficiary of a trust or contract.
(c) Real and personal property in Alabama may be acquired, held, encumbered, and transferred by a nonprofit association, whether the nonprofit association or a member has any other relationship to Alabama.
(Acts 1995, No. 95-527, p. 1064, §5; §10-3B-5; amended and renumbered by Act 2009-513, p. 967, §320.)
(a) A nonprofit association shall execute and record a statement of authority to transfer an estate or interest in real property in the name of the nonprofit association.
(b) An estate or interest in real property in the name of a nonprofit association may be transferred by a person so authorized in a statement of authority recorded in the office of the judge of probate of the county in which the real property is located.
(c) A statement of authority shall set forth:
(1) The name of the nonprofit association;
(2) The address in Alabama, including the street address, if any, of the nonprofit association, or, if the nonprofit association does not have an address in Alabama, its address out of state;
(3) The name or title of a person authorized to transfer an estate or interest in real property held in the name of the nonprofit association; and
(4) The action, procedure, or vote of the nonprofit association which authorizes the person to transfer the real property of the nonprofit association and which authorizes the person to execute the statement of authority.
(d) A statement of authority shall be executed and recorded in the same manner as a deed by a person who is not the person authorized to transfer the estate or interest.
(e) The judge of probate shall collect a fee for recording a statement of authority in accordance with Article 4 of Chapter 1.
(f) An amendment, including a cancellation, of a statement of authority shall meet the requirements for execution and recording, and be accompanied by payment of the same recording fee payable to and for the judge of probate, of an original statement. Unless cancelled earlier, a recorded statement of authority as amended is cancelled by operation of law five years after the date of the most recent amended statement of authority.
(g) If the record title to real property is in the name of a nonprofit association and the statement of authority is recorded in the office of the judge of probate of the county in which the real property is located, the authority of the person named in a statement of authority is conclusive in favor of a person who gives value without notice that the person lacks authority.
(Acts 1995, No. 95-527, p. 1064, §6; §10-3B-6; amended and renumbered by Act 2009-513, p. 967, §320; Act 2020-73, §10.)
(a) A nonprofit association is a legal entity separate from its members for the purposes of determining and enforcing rights, duties, and liabilities in contract and tort.
(b) A person is not liable for a breach of a nonprofit association’s contract merely because the person is a member, is authorized to participate in the management of the affairs of the nonprofit association, or is a person considered to be a member by the nonprofit association.
(c) A person is not liable for a tortious act or omission for which a nonprofit association is liable merely because the person is a member, is authorized to participate in the management of the affairs of the nonprofit association, or is a person considered to be a member by the nonprofit association.
(d) A tortious act or omission of a member or other person for which a nonprofit association is liable is not imputed to a person merely because the person is a member of the nonprofit association, is authorized to participate in the management of the affairs of the nonprofit association, or is a person considered to be a member by the nonprofit association.
(e) A member of, or a person considered to be a member by, a nonprofit association may assert a claim against the nonprofit association. A nonprofit association may assert a claim against a member or a person considered to be a member by the nonprofit association.
(Acts 1995, No. 95-527, p. 1064, §7; §10-3B-7; amended and renumbered by Act 2009-513, p. 967, §320.)
(a) A nonprofit association, in its name, may institute, defend, intervene, or participate in a judicial, administrative, or other governmental proceeding or in an arbitration, mediation, or any other form of alternative dispute resolution.
(b) A nonprofit association may assert a claim in its name on behalf of its members if one or more members of the nonprofit association have standing to assert a claim in their own right, the interests the nonprofit association seeks to protect are germane to its purposes, and neither the claim asserted nor the relief requested requires the participation of a member.
(Acts 1995, No. 95-527, p. 1064, §8; §10-3B-8; amended and renumbered by Act 2009-513, p. 967, §320.)
A judgment or order against a nonprofit association is not by itself a judgment or order against a member.
(Acts 1995, No. 95-527, p. 1064, §9; §10-3B-9; amended and renumbered by Act 2009-513, p. 967, §320.)
If a nonprofit association has been inactive for five years or longer, or has been dissolved, a person in possession or control of personal property of the nonprofit association may transfer the property:
(1) If a document of a nonprofit association specifies a person to whom transfer is to be made under these circumstances, to that person; or
(2) If no person is so specified, to a nonprofit association or nonprofit corporation pursuing broadly similar purposes, or to a government or governmental subdivision, agency, or instrumentality.
(Acts 1995, No. 95-527, p. 1064, §10; §10-3B-10; amended and renumbered by Act 2009-513, p. 967, §320.)
(a) A nonprofit association may deliver to the Secretary of State for filing a statement appointing an agent authorized to receive service of process.
(b) A statement appointing an agent shall set forth:
(1) The name of the nonprofit association;
(2) The address in Alabama, including the street address, if any, of the nonprofit association, or, if the nonprofit association does not have an address in Alabama, its address out of state; and
(3) The name of the person in Alabama authorized to receive service of process and the person’s address, including the street address, in Alabama.
(c) A statement appointing an agent shall be signed and acknowledged by a person authorized to manage the affairs of the nonprofit association. The statement shall also be signed and acknowledged by the person appointed agent, who thereby accepts appointment.
(d) The appointed agent may resign by delivering to the Secretary of State for filing a resignation, and by giving notice to the nonprofit association. The appointment of the agent shall terminate upon the expiration of 30 days after the Secretary of State has filed the resignation.
(e) The Secretary of State may collect a fee for filing a statement appointing an agent to receive service of process, an amendment, or a resignation in the amount charged for filing similar documents for nonprofit corporations.
(f) An amendment to a statement appointing an agent to receive service of process shall meet the requirements for execution of an original statement.
(Acts 1995, No. 95-527, p. 1064, §11; §10-3B-11; amended and renumbered by Act 2009-513, p. 967, §320; Act 2020-73, §10.)
A claim for relief against a nonprofit association does not abate merely because of a change in its members or persons authorized to manage the affairs of the nonprofit association.
(Acts 1995, No. 95-527, p. 1064, §12; §10-3B-12; amended and renumbered by Act 2009-513, p. 967, §320.)
Venue shall be as is provided in Section 6-3-6, as may be amended from time to time.
(Acts 1995, No. 95-527, p. 1064, §13; §10-3B-13; amended and renumbered by Act 2009-513, p. 967, §320.)
In an action or proceeding against a nonprofit association, a summons and complaint shall be served on an agent authorized by appointment in Section 10A-17-1.11 herein to receive service of process, or on an officer, managing or general agent, or person authorized to participate in the management of its affairs, or in any manner otherwise provided in the Alabama Rules of Civil Procedure. If after reasonable efforts to accomplish service through these methods, service cannot be accomplished, then service may be made on a member of the association.
(Acts 1995, No. 95-527, p. 1064, §14; §10-3B-14; amended and renumbered by Act 2009-513, p. 967, §320.)
(a) If, before January 1, 1996, an estate or interest in real or personal property was purportedly transferred to a nonprofit association, on January 1, 1996 the estate or interest vests in the nonprofit association unless the parties have treated the transfer as ineffective.
(b) If, before January 1, 1996, the transfer vested the estate or interest in another person to hold the estate or interest as a fiduciary for the benefit of the nonprofit association, its members, or both, on or after January 1, 1996, unless otherwise prohibited by terms of a written trust, the fiduciary may transfer the estate or interest to the nonprofit association in its name, or the nonprofit association, by appropriate proceedings, may require that the estate or interest be transferred to it in its name.
(Acts 1995, No. 95-527, p. 1064, §15; §10-3B-15; amended and renumbered by Act 2009-513, p. 967, §320.)
[Repealed]
The following sections and parts of sections of the Code of Alabama 1975, as amended, are not repealed by this chapter:
(1) Sections 2-10-1 through 2-10-108, regarding cooperatives and associations.
(2) Section 6-3-4, regarding venue of actions against unincorporated groups issuing insurance policies.
(3) Section 6-3-6, regarding venue of actions against unincorporated organizations or associations.
(4) Section 6-5-336, regarding immunity of volunteers of nonprofit organizations if actions are in good faith and in the scope of official functions and duties, and do not represent willful or wanton misconduct.
(5) Section 6-6-220, defining “Person” as including any person, partnership, joint stock company, unincorporated association, or society, or municipal or other corporation.
(6) Section 6-7-80, regarding right to commence actions in name of unincorporated organization or association.
(7) Section 6-7-81, regarding commencement of actions against unincorporated organization or association; satisfaction of judgment against unincorporated organization or association.
(8) Sections 10A-20-1.01 through 10A-20-1.09, regarding Bishops of Diocese, incorporation.
(9) Sections 10A-20-2.01 through 10A-20-2.09, regarding churches, public societies, and graveyard owners, incorporation.
(10) Sections 10A-20-3.01 through 10A-20-3.04, regarding Conference of Ministers, incorporation.
(11) Sections 10A-20-4.01 through 10A-20-4.04, regarding state conventions or associations of churches, incorporation.
(12) Sections 10A-20-5.01 through 10A-20-5.03, regarding educational institutions, incorporation.
(13) Sections 10A-20-6.01 through 10A-20-6.16, regarding health care service plans.
(14) Sections 10A-20-7.01 through 10A-20-7.23, regarding industrial development corporations.
(15) Sections 10A-20-8.01 through 10A-20-8.10, regarding local fraternal orders.
(16) Sections 10A-20-9.01 through 10A-20-9.05, regarding single tax and other mutual economic associations.
(17) Section 10A-20-10.01, regarding private foundations.
(18) Section 10A-20-13.01, regarding retail merchants’ associations, incorporation.
(19) Section 10A-20-14.01, regarding wholesale merchants’ associations, incorporation.
(20) Sections 10A-20-15.01 through 10A-20-15.04, regarding water power companies.
(21) Sections 10A-20-16.01 through 10A-20-16.05, regarding officers of nonprofit corporations, associations, or organizations liable only for willful or wanton misconduct or fraud, or gross negligence.
(Acts 1995, No. 95-527, p. 1064, §16; §10-3B-16; amended and renumbered by Act 2009-513, p. 967, §320.)
This chapter does not affect an action or proceeding commenced or right accrued before this chapter takes effect.
(Acts 1995, No. 95-527, p. 1064, §17; §10-3B-17; amended and renumbered by Act 2009-513, p. 967, §320.)
This chapter shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this chapter among states enacting it.
(Acts 1995, No. 95-527, p. 1064, §18; §10-3B-18; amended and renumbered by Act 2009-513, p. 967, §320.)
This article together with applicable provisions of Chapter 1 shall be known and may be cited as the Decentralized Unincorporated Nonprofit Association Law.
(Act 2026-325, §2.)
For the purposes of this article, the following terms have the following meanings:
(1) ADMINISTRATOR. A person authorized by the members of a decentralized unincorporated nonprofit association to fulfill administrative or operational tasks at the direction of the membership.
(2) DECENTRALIZED UNINCORPORATED NONPROFIT ASSOCIATION or NONPROFIT ASSOCIATION. An unincorporated nonprofit association that meets the following requirements:
a. Consists of at least 100 members joined by mutual consent in digital activity under an agreement, which may be in writing or inferred from conduct, for a common nonprofit purpose, including, but not limited to, administering the affairs of a distributed ledger technology or network of smart contracts.
b. Has elected to be formed under this article.
c. Is not formed under any other law governing the nonprofit association’s organization or operation.
(3) DIGITAL ASSET. A representation of economic, proprietary, or access rights that is stored in a computer readable format and is either a digital consumer asset, digital security, or virtual currency.
(4) DISTRIBUTED LEDGER TECHNOLOGY. A distributed ledger protocol and supporting infrastructure, including blockchain, which uses a distributed, shared, and replicated ledger, whether public or private, permissioned or permissionless, and which may include the use of digital assets as a medium of electronic exchange.
(5) ESTABLISHED PRACTICES. The practices used by a decentralized unincorporated nonprofit association without material change during the most recent five years of the nonprofit association’s existence, or if the nonprofit association has existed for less than five years, during the nonprofit association’s entire existence.
(6) GOVERNING PRINCIPLES. All agreements and any amendment or restatement of those agreements, including any decentralized unincorporated nonprofit association agreements, consensus formation algorithms, smart contracts, or enacted governance proposals, which govern the purpose or operation of a decentralized unincorporated nonprofit association and the rights and obligations of the nonprofit association’s members and administrators, whether contained in a record, implied from the nonprofit association’s established practices, or both.
(7) MEMBER. A person who, under the governing principles of a decentralized unincorporated nonprofit association, may participate in the selection of the decentralized unincorporated nonprofit association’s administrators or the development of the policies and activities of the decentralized unincorporated nonprofit association.
(8) MEMBERSHIP INTEREST. A member’s voting rights in a decentralized unincorporated nonprofit association determined by the decentralized unincorporated nonprofit association’s governing principles, including as ascertained from decentralized ledger technology on which the decentralized unincorporated nonprofit association relies to determine a member’s voting rights.
(9) NONPROFIT PURPOSE. Any purpose for which a nonprofit corporation could be organized under Article 1, and where no part of income or profit is distributable to its members or administrators.
(10) PERSON. An individual, corporation, business trust, estate, trust, partnership, association, agency, joint venture, government, governmental subdivision or instrumentality, or any other legal commercial entity.
(11) RECORD. Information that is inscribed on a tangible medium or stored in an electronic or other medium that is retrievable in perceivable form.
(12) SMART CONTRACT. An automated transaction, as defined in any substantially similar analogue or code, script, or programming language relying on distributed ledger technology, including blockchain, which may include facilitating and instructing transfers of an asset, administrating membership interest votes with respect to a decentralized unincorporated nonprofit association, or issuing executable instructions for these actions based on the occurrence or nonoccurrence of specified conditions.
(13) STATE. A state of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or any territory or insular possession subject to the jurisdiction of the United States.
(Act 2026-325, §2.)
(a) The law of this state governs any decentralized unincorporated nonprofit association that is formed in this state.
(b) Each decentralized unincorporated nonprofit association’s governing principles shall identify the jurisdiction in which the decentralized unincorporated nonprofit association is formed.
(Act 2026-325, §2.)
(a) A decentralized unincorporated nonprofit association may engage in profit-making activities. Profits from any activities shall be used in furtherance of, or set aside for, the nonprofit association’s common nonprofit purpose.
(b) Except as provided in subsection (c), a decentralized unincorporated nonprofit association may not make distributions to its members or administrators.
(c) A decentralized unincorporated nonprofit association may do all of the following:
(1) Pay reasonable compensation or reimburse reasonable expenses to its members, administrators, and persons outside of the nonprofit association for services rendered, including with respect to the administration and operation of the nonprofit association, which may include the provision of collateral for the self-insurance of the nonprofit association, voting, or participation in the nonprofit association’s operations and activities.
(2) Confer benefits on its members and administrators in conformity with its common nonprofit purpose.
(3) Repurchase membership interests to the extent authorized by the nonprofit association’s governing principles.
(4) Make distributions of property to members upon winding up and termination of the decentralized unincorporated nonprofit association to the extent permitted by Section 10A-17-2.26.
(Act 2026-325, §2.)
(a) Unless prohibited or otherwise limited by its written rules or governing documents, a decentralized unincorporated nonprofit association in its name may acquire, hold, encumber, or transfer an estate or interest in real or personal property.
(b) Unless prohibited or otherwise limited by its written rules or governing documents, a decentralized unincorporated nonprofit association may be a legatee, devisee, or beneficiary of a trust or contract.
(c) Real and personal property in Alabama may be acquired, held, encumbered, and transferred by a decentralized unincorporated nonprofit association, whether it or a member has any other relationship to Alabama.
(Act 2026-325, §2.)
(a) A decentralized unincorporated nonprofit association shall execute and record a statement of authority to transfer an estate or interest in real property in the name of the nonprofit association.
(b) An estate or interest in real property in the name of a decentralized unincorporated nonprofit association may be transferred by a person so authorized in a statement of authority recorded in the office of the judge of probate of the county in which the real property is located.
(c) A statement of authority shall set forth:
(1) The name of the decentralized unincorporated nonprofit association;
(2) The address in Alabama, including the street address, if any, of the decentralized unincorporated nonprofit association, or, if the decentralized unincorporated nonprofit association does not have an address in Alabama, its address out of state;
(3) The name or title of a person authorized to transfer an estate or interest in real property held in the name of the decentralized unincorporated nonprofit association; and
(4) The action, procedure, or vote of the decentralized unincorporated nonprofit association which authorizes the person to transfer the real property of the decentralized unincorporated nonprofit association and which authorizes the person to execute the statement of authority.
(d) A statement of authority shall be executed and recorded in the same manner as a deed by a person who is not the person authorized to transfer the estate or interest.
(e) The judge of probate shall collect a fee for recording a statement of authority in accordance with Article 4 of Chapter 1.
(f) An amendment, including a cancellation, of a statement of authority shall meet the requirements for execution and recording, and be accompanied by payment of the same recording fee payable to and for the judge of probate, of an original statement. Unless canceled earlier, a recorded statement of authority as amended is canceled by operation of law five years after the date of the most recent amended statement of authority.
(g) If the record title to real property is in the name of a decentralized unincorporated nonprofit association and the statement of authority is recorded in the office of the judge of probate of the county in which the real property is located, the authority of the person named in a statement of authority is conclusive in favor of a person who gives value without notice that the person lacks authority.
(Act 2026-325, §2.)
(a) A decentralized unincorporated nonprofit association is a legal entity separate from its members for the purposes of determining and enforcing rights, duties, and liabilities in contract and tort.
(b) A person is not liable for a breach of a decentralized unincorporated nonprofit association’s contract merely because the person is a member, administrator, authorized to participate in the management of the affairs of the nonprofit association, or considered a member by the nonprofit association.
(c) A person is not liable for a tortious act or omission for which a decentralized unincorporated nonprofit association is liable merely because the person is a member or administrator of the nonprofit association, authorized to participate in the management of the affairs of the nonprofit association, or considered a member by the nonprofit association.
(d) A tortious act or omission of a member, administrator, or other person for which a decentralized unincorporated nonprofit association is liable is not imputed to a person merely because the person is: (i) a member or administrator of the nonprofit association; (ii) authorized to participate in the management of the affairs of the nonprofit association; (iii) or considered a member by the nonprofit association.
(e) A member, administrator, person authorized to participate in the management of the affairs of the nonprofit association, or person considered a member by the nonprofit association may assert a claim against the decentralized unincorporated nonprofit association. A decentralized unincorporated nonprofit association may assert a claim against a member, administrator, person authorized to participate in the management of the affairs of the nonprofit association, or person considered a member by the nonprofit association.
(Act 2026-325, §2.)
(a) A decentralized unincorporated nonprofit association, in its own name, may institute, defend, intervene, or participate in a judicial, administrative, or other governmental proceeding or in an arbitration, mediation, or any other form of alternative dispute resolution.
(b) A decentralized unincorporated nonprofit association may assert a claim on behalf of its members if all of the following apply:
(1) One or more members of the nonprofit association have standing to assert a claim in their own right.
(2) The interests the nonprofit association seeks to protect are germane to the nonprofit association’s purposes.
(3) Neither the claim asserted, nor the relief requested, requires the participation of a member.
(Act 2026-325, §2.)
A judgment or order against a decentralized unincorporated nonprofit association is not by itself a judgment or order against a member or administrator of the nonprofit association.
(Act 2026-325, §2.)
(a) A decentralized unincorporated nonprofit association may deliver to the Secretary of State for filing a statement appointing an agent authorized to receive service of process.
(b) A statement appointing an agent shall set forth:
(1) The name of the nonprofit association;
(2) The address in Alabama, including the street address, if any, of the decentralized unincorporated nonprofit association, or, if the decentralized unincorporated nonprofit association does not have an address in Alabama, its address out of state; and
(3) The name of the person in Alabama authorized to receive service of process and the person’s address, including the street address, in Alabama.
(c) A statement appointing an agent shall be signed and acknowledged by a person authorized to manage the affairs of the decentralized unincorporated nonprofit association. The statement shall also be signed and acknowledged by the person appointed agent, who thereby accepts appointment.
(d) The appointed agent may resign by delivering to the Secretary of State for filing a resignation, and by giving notice to the decentralized unincorporated nonprofit association. The appointment of the agent shall terminate upon the expiration of 30 days after the Secretary of State has filed the resignation.
(e) The Secretary of State may collect a fee for filing a statement appointing an agent to receive service of process, an amendment, or a resignation in the amount charged for filing similar documents for nonprofit corporations.
(f) An amendment to a statement appointing an agent to receive service of process shall meet the requirements for execution of an original statement.
(Act 2026-325, §2.)
In an action or proceeding against a decentralized unincorporated nonprofit association, a summons and complaint shall be served on the agent authorized by appointment in Section 10A-17-2.10 to receive service of process, on a person authorized to administer the affairs of the nonprofit association, or in any manner otherwise provided in the Alabama Rules of Civil Procedure. If, after reasonable efforts to accomplish service through the methods provided in this section, service cannot be accomplished, then service may be made on a member of the nonprofit association.
(Act 2026-325, §2.)
A claim for relief against a decentralized unincorporated nonprofit association shall not abate merely because of a change in its members or persons authorized to administer the affairs of the nonprofit association.
(Act 2026-325, §2.)
Venue shall be:
(1) As provided in Section 6-3-6; or
(2) The county in which the agent authorized to receive service of process under Section 10A-17-2.10 resides.
(Act 2026-325, §2.)
(a) A decentralized unincorporated nonprofit association shall have perpetual existence unless its governing principles otherwise specify.
(b) A decentralized unincorporated nonprofit association may be dissolved as follows:
(1) If the governing principles of the nonprofit association provide a time or method for dissolution, by that method.
(2) If the governing principles of the nonprofit association do not provide a method for dissolution, by approval of its members pursuant to Section 10A-17-2.20.
(3) If membership in the decentralized unincorporated nonprofit association falls below 100 members and the decentralized unincorporated nonprofit association does not meet the requirements of Sections 10A-17-2.01 through 10A-17-2.15. In the event membership in the nonprofit association falls below 100 members and the nonprofit association meets the requirements of Sections 10A-17-2.01 through 10A-17-2.15, the entity shall automatically transition to an Alabama unincorporated nonprofit association unless the governing principles otherwise specify.
(4) By court order.
(c) After dissolution, a decentralized unincorporated nonprofit association continues in existence until its activities are wound up and terminated pursuant to Section 10A-17-2.26.
(Act 2026-325, §2.)
(a)(1) A person may become a member of a decentralized unincorporated nonprofit association in accordance with the governing principles of that decentralized unincorporated nonprofit association.
(2) If there are no applicable governing principles, a person shall be considered a member upon the purchase or assumption of ownership of a membership interest.
(3) A person shall continue as a member absent the person’s suspension, dismissal, or expulsion pursuant to subsection (b), resignation pursuant to Section 10A-17-2.16, or the decentralized unincorporated nonprofit association’s dissolution and winding-up pursuant to this article.
(b) Subject to the governing principles of the decentralized unincorporated nonprofit association, a member may be suspended, dismissed, or expelled. If there are no applicable governing principles, a member may be suspended, dismissed, or expelled by approval of the membership in accordance with Section 10A-17-2.20.
(c) Unless otherwise provided for in the governing principles, suspension, dismissal, or expulsion of a member does not relieve the member of any obligation incurred, or commitment made by the member, before the suspension, dismissal, or expulsion.
(Act 2026-325, §2.)
(a)(1) A member may resign as a member of a decentralized unincorporated nonprofit association in accordance with the governing principles of that decentralized unincorporated nonprofit association.
(2) If there are no applicable governing principles, a member shall be deemed to have resigned as a member upon the disposal, whether voluntary or involuntary, of all membership interests or other property or instruments that confer upon the person a voting right within the nonprofit association.
(b) Unless otherwise provided for in the governing principles, resignation of a member does not relieve the member of any obligation incurred or commitment made by the member before the resignation.
(Act 2026-325, §2.)
(a) Unless otherwise provided for in the governing principles, a member shall not have any fiduciary duty to a decentralized unincorporated nonprofit association or to any other member of the decentralized unincorporated nonprofit association merely by reason of being a member.
(b) A member acting on behalf of the decentralized unincorporated nonprofit association shall discharge his or her duties in a manner the member reasonably believes to be in the best interest of the nonprofit association.
(Act 2026-325, §2.)
(a) A member is not an agent of a decentralized unincorporated nonprofit association merely by being a member.
(b) A person’s status as a member does not prevent or restrict laws other than this article from imposing liability on a decentralized unincorporated nonprofit association because of a member’s conduct.
(Act 2026-325, §2.)
Except as otherwise provided in the decentralized unincorporated nonprofit association’s governing principles, a member’s interest or any right granted pursuant to the governing principles is freely transferable to another person through conveyance of the membership interest.
(Act 2026-325, §2.)
(a) Except as otherwise provided in the governing principles, a decentralized unincorporated nonprofit association shall have the approval of a majority of the membership interests participating in a vote to do any of the following:
(1) Suspend, dismiss, or expel a member.
(2) Select or dismiss an administrator.
(3) Adopt, amend, or repeal the governing principles.
(4) Sell, lease, exchange, or otherwise dispose of the property of the decentralized unincorporated nonprofit association.
(5) Dissolve the decentralized unincorporated nonprofit association under Section 10A-17-2.14.
(6) Undertake any other act outside of the ordinary course of the decentralized unincorporated nonprofit association’s activities.
(7) Determine the policy and purpose of the decentralized unincorporated nonprofit association.
(b) In order to perform any act or exercise any right that the governing principles require to be approved by the membership, a decentralized unincorporated nonprofit association must have the approval of the membership to act in accordance with its governing principles.
(c) Unless otherwise provided for in the governing principles, membership interest in a decentralized unincorporated nonprofit association shall be calculated in proportion to a member’s voting rights within the nonprofit association.
(Act 2026-325, §2.)
(a) A decentralized unincorporated nonprofit association may provide for its governance, in whole or in part, through distributed ledger technology including, but not limited to, smart contracts.
(b) The governing principles for a decentralized unincorporated nonprofit association may include, but not be limited to, the following provisions:
(1) Specify whether any distributed ledger technology used or enabled by the decentralized unincorporated nonprofit association will be fully immutable or subject to change by the decentralized unincorporated nonprofit association and whether any distributed ledger will be fully or partially public or private, including the extent of a member’s access to information.
(2) Adopt voting procedures, which may include smart contracts deployed to distributed ledger technology and which may provide for all of the following:
a. Proposals from members or administrators in the decentralized unincorporated nonprofit association for upgrades, modifications, or additions to software systems or protocols.
b. Other proposed changes to the decentralized unincorporated nonprofit association’s governing principles.
c. Any other matters of governance or activities within the purpose of the decentralized unincorporated nonprofit association.
(Act 2026-325, §2.)
In accordance with its governing principles, a decentralized unincorporated nonprofit association may do both of the following:
(1) Adopt any reasonable algorithmic means for establishing consensus for the validation of records, as well as for establishing requirements, processes, and procedures for conducting operations or making organizational decisions with respect to the distributed ledger technology used by the nonprofit association.
(2) In accordance with any procedure specified pursuant to Section 10A-17-2.21, modify the consensus mechanism, as well as the requirements, processes, and procedures or substitute a new consensus mechanism, requirements, processes, or procedures that comply with this state’s law and the governing principles of the nonprofit association.
(Act 2026-325, §2.)
(a) Unless otherwise provided for in the decentralized unincorporated nonprofit association’s governing principles, the members of the nonprofit association may select the nonprofit association’s administrators in accordance with Section 10A-17-2.20.
(b) If no administrators are selected, none of the members may be considered administrators for the decentralized unincorporated nonprofit association.
(c) No decentralized unincorporated nonprofit association shall be required to have an administrator, and the rights and duties of all administrators shall be established as part of the authorization of authority to act as an administrator.
(d) If in a record, the governing principles of a decentralized unincorporated nonprofit association may limit or eliminate the liability of an administrator to the decentralized unincorporated nonprofit association or its members for money damages for any action taken, or failure to take any action, as an administrator, except liability for any of the following:
(1) The amount of financial benefit improperly received by an administrator.
(2) An intentional infliction of harm on the nonprofit association or its members.
(3) An intentional violation of criminal law.
(4) Breach of the duty of loyalty should one exist, unless, following full disclosure of all material facts to the nonprofit association members, the specific act or transaction that would otherwise breach the duty of loyalty is authorized or ratified by approval of the disinterested members pursuant to Section 10A-17-2.20.
(5) Improper distributions.
(Act 2026-325, §2.)
(a) Except as provided by subsection (b), on reasonable notice, a member or administrator of a decentralized unincorporated nonprofit association is entitled to an electronic record of any record maintained by the nonprofit association regarding the nonprofit association’s activities, financial condition, and other circumstances, to the extent the information is material to the member’s or administrator’s rights and duties under the decentralized unincorporated nonprofit association’s governing principles or this article.
(b) A decentralized unincorporated nonprofit association is not obligated to provide records requested from a member or administrator if access to the information is contained in a record available to the member or administrator in a medium available to the member, including distributed ledger technology.
(c)(1) A decentralized unincorporated nonprofit association may impose reasonable restrictions on access to and use of information that may be provided under this section, including by designating the information confidential and imposing nondisclosure or other safeguarding obligations on the recipient of the information.
(2) In a dispute concerning the reasonableness of a restriction under this subsection, the decentralized unincorporated nonprofit association shall have the burden of proving reasonableness.
(d) A former member or administrator may have access to information to which the former member or administrator was entitled to as a member or administrator if all of the following apply:
(1) The information relates to the period of time during which the former member or administrator was a member or administrator.
(2) The former member or administrator seeks the information in good faith.
(3) The former member or administrator satisfies the requirements of subsections (a) through (c) with respect to the information.
(e) A decentralized unincorporated nonprofit association shall not be obligated to collect and maintain a list of members or information on an individual member, including the names or addresses of members.
(Act 2026-325, §2.)
(a) Unless otherwise provided in its governing principles, a decentralized unincorporated nonprofit association may reimburse a member or administrator for authorized expenses reasonably incurred on behalf of the nonprofit association.
(b) A decentralized unincorporated nonprofit association may indemnify a member or administrator for any debt, obligation, or other liability incurred in the course of the member or administrator’s activities on behalf of the nonprofit association. To be eligible for indemnification, an administrator must have complied with the duties stated in Section 10A-17-2.23. If in a record, a nonprofit association’s governing principles may broaden or limit this right of indemnification.
(c) If a person is made or threatened to be made a party in a proceeding based on that person’s conduct in the affairs of a decentralized unincorporated nonprofit association, that person is entitled, upon written request to the decentralized unincorporated nonprofit association, including through distributed ledger technology, to receive payment of or reimbursement by the nonprofit association, of reasonable expenses, including attorney fees and disbursements, incurred by that person in advance of the final disposition of the proceeding. To be entitled to these payments or advances, the person making the request shall make a written affirmation that the person has a good faith belief that the criteria for indemnification in subsection (b) has been satisfied and that the person will repay the amounts paid or reimbursed if it is determined that the criteria for reimbursement has not been satisfied. No payment or reimbursement under this subsection shall be made without prior approval, in a record, of the disinterested members under Section 10A-17-2.20.
(d) A decentralized unincorporated nonprofit association may purchase and maintain insurance on behalf of a member or administrator for liability asserted against or incurred by the member or administrator in that capacity, even if the decentralized unincorporated nonprofit association would not have the power to indemnify or advance expenses to the member or administrator against the same liability under this section.
(e) These rights of reimbursement, indemnification, and advancement of expense apply to former members or administrators for activities undertaken on behalf of the decentralized unincorporated nonprofit association while they were members or administrators.
(Act 2026-325, §2.)
(a) A dissolved decentralized unincorporated nonprofit association shall wind up its operations and may continue after dissolution only for the purpose of winding up.
(b) In winding up a decentralized unincorporated nonprofit association, the members shall discharge the decentralized unincorporated nonprofit association’s debts, obligations, and other liabilities, settle and close the decentralized unincorporated nonprofit association’s business, and distribute any remaining property as follows:
(1) To another entity or person with similar nonprofit purposes, if required by law other than this article.
(2) In accordance with the decentralized unincorporated nonprofit association’s governing principles. In the absence of applicable governing principles, to the current members of the decentralized unincorporated nonprofit association in proportion to their membership interests.
(3) If neither subdivision (1) or (2) applies, in accordance with the law of unclaimed property contained in Article 2A, Chapter 12 of Title 35.
(c) In winding up a decentralized unincorporated nonprofit association, the members may do all of the following:
(1) Authorize an administrator to wind up the decentralized unincorporated nonprofit association in accordance with Section 10A-17-2.14. Any authorized administrator shall owe the nonprofit association a duty of care in the conduct or winding up of the decentralized unincorporated nonprofit association to refrain from grossly negligent or reckless conduct, willful or intentional misconduct, or a knowing violation of the law.
(2) Preserve the decentralized unincorporated nonprofit association’s operations and property as a going concern for a reasonable time.
(3) Prosecute and defend actions and proceedings, whether civil, criminal, or administrative.
(4) Transfer the decentralized unincorporated nonprofit association’s property.
(5) Settle disputes by mediation or arbitration.
(6) Perform other acts necessary or appropriate to the winding up.
(d) If the members of a decentralized unincorporated nonprofit association do not appoint an administrator or administrators to wind up the decentralized unincorporated nonprofit association, the members shall owe the decentralized unincorporated nonprofit association a duty of care in the conduct or winding up of the decentralized unincorporated nonprofit association’s operations to refrain from engaging in grossly negligent or reckless conduct, willful or intentional misconduct, or a knowing violation of the law.
(Act 2026-325, §2.)
A decentralized unincorporated nonprofit association may effect a merger or conversion by complying with the applicable provisions of Chapter 1 and its governing principles.
(Act 2026-325, §2.)
Principles of law and equity supplement this chapter unless displaced by a specific provision of this chapter.
(Act 2026-325, §2.)
This chapter and the provisions of Chapter 1, to the extent applicable to Alabama statewide trade associations, may be cited as the Alabama Statewide Trade Association Law.
(Act 2024-413, §3.)
The provisions of the Alabama Nonprofit Corporation Law shall apply to Alabama statewide trade associations, except to the extent they are inconsistent with the provisions of this chapter.
(Act 2024-413, §3.)
As used in this chapter, unless the context otherwise requires, the term:
(a) ALABAMA STATEWIDE TRADE ASSOCIATION means a domestic entity that is formed under or is governed by the Alabama Nonprofit Corporation Law and that:
(1) is a membership nonprofit corporation as defined in the Alabama Nonprofit Corporation Law;
(2) was formed on or before January 1, 2024, and is in existence as of January 1, 2024;
(3) has its principal office or other headquarters in this state;
(4) represents or promotes the common business, professional, or industry interests of its members on a statewide basis;
(5) has elected to be governed by this chapter on or before December 31, 2024, by amending its certificate of incorporation in accordance with Section 10A-18-1.09(a); and
(6) has not ceased to be governed by this chapter in accordance with Section 10A-18-1.09(b) or Section 10A-18-1.09(c).
(b) POLICIES AND PROCEDURES means guidelines that provide detailed instructions on how specific tasks, activities, or situations should be handled within an Alabama statewide trade association, including areas such as membership application and renewal processes, event planning and execution, code of conduct and ethics, financial management and reporting, dispute resolution, communication protocols, and operational aspects relevant to the Alabama statewide trade association’s functioning.
(Act 2024-413, §3.)
(a) In lieu of any records required to be maintained by a membership nonprofit corporation under the Alabama Nonprofit Corporation Law, a statewide trade association must maintain the following records:
(1) its certificate of incorporation as currently in effect;
(2) its bylaws as currently in effect;
(3) its policies and procedures as currently in effect;
(4) minutes of all meetings of its board of directors and its members;
(5) a list of the names and business addresses of its current directors and officers;
(6) its annual financial statements, annual audits, and annual federal and state income tax returns for its last three fiscal years (or such shorter period of existence); and
(7) a list of its current members in alphabetical order by class of membership showing the address for each member to which notices and other communications from the Alabama statewide trade association are to be sent.
(b) An Alabama statewide trade association shall maintain its books and records for its last three fiscal years (or such shorter period of existence) in a form that permits preparation of the financial statements in accordance with generally accepted accounting principles as applied to nonprofit corporations. Financial statements shall mean balance sheets, income statements, statements of activities, notes to financial statements, statements of financial position, and any investment summaries.
(c) An Alabama statewide trade association shall have an annual audit of its financial statements. The audit shall be conducted by an independent certified public accounting firm that regularly audits nonprofit entities. The independent certified public accounting firm shall be appointed annually by the board of directors.
(Act 2024-413, §3.)
In lieu of any inspection rights of the members of a membership nonprofit corporation under the Alabama Nonprofit Corporation Law:
(a) A member of an Alabama statewide trade association is entitled to inspect the records required to be maintained by the Alabama statewide trade association under Sections 10A-18-1.04(a)(1) through (6) during regular business hours at the principal office of the Alabama statewide trade association provided that the member gives the Alabama statewide trade association written notice of the member’s demand at least five business days before the date on which the member wishes to inspect.
(b) A member may inspect the records under Sections 10A-18-1.04(a)(1) through (6) only if:
(1) the member’s request is made in good faith and for a proper purpose;
(2) the member’s request describes with reasonable particularity the member’s purpose and the records the member desires to inspect; and
(3) the records are directly connected with the member’s purpose.
(c) An Alabama statewide trade association may impose reasonable restrictions and conditions on access to and use of the records to be inspected under subsection (a), including designating information confidential and imposing nondisclosure and safeguarding, and may further keep confidential from its members and other persons, for a period of time as the Alabama statewide trade association deems reasonable, any information that the Alabama statewide trade association reasonably believes to be in the nature of a trade secret or other information the disclosure of which the Alabama statewide trade association in good faith believes is not in the best interest of the Alabama statewide trade association or could damage the Alabama statewide trade association or its activities or affairs or that the Alabama statewide trade association is required by law or by agreement with a third party to keep confidential. In any dispute concerning the reasonableness of a restriction under this subsection, the Alabama statewide trade association has the burden of proving reasonableness.
(d) This section does not limit the power of a court, upon showing of good cause, to compel the production of the books and records of an Alabama statewide trade association, including records not set forth in Section 10A-18-1.04, to the court for examination by a court appointed professional and to impose reasonable restrictions on the use of those books and records by that court appointed professional.
(Act 2024-413, §3.)
(a) If an Alabama statewide trade association does not, within the time period set forth in Section 10A-18-1.05, allow a member who complies with Section 10A-18-1.05 to inspect the records required to be maintained by Sections 10A-18-1.04(a)(1) through (6), a member may petition the Montgomery County Circuit Court, and the court may summarily order inspection of the records demanded at the Alabama statewide trade association’s expense upon application of the member.
(b) If the court orders inspection of the records demanded under Section 10A-18-1.05, it shall impose reasonable restrictions on the confidentiality, use, or distribution of the records by the demanding member and the court shall also order the Alabama statewide trade association to pay the member’s expenses incurred to obtain the order, unless the Alabama statewide trade association establishes that it refused inspection in good faith because the Alabama statewide trade association had:
(1) a reasonable basis for doubt about the right of the member to inspect the records demanded; or
(2) required reasonable restrictions on the confidentiality, use, or distribution of the records demanded to which the demanding member had been unwilling to agree.
(Act 2024-413, §3.)
(a) If a member of an Alabama statewide trade association has a reasonable belief that financial fraud or malfeasance has occurred or is occurring at the Alabama statewide trade association, that member may petition the Montgomery County Circuit Court for an independent audit of the financial statements of the Alabama statewide trade association. For good cause shown, the court may order an independent audit of the financial statements of the Alabama statewide trade association with that independent audit report to be made to the court. If the court does not find good cause, the court costs shall be assessed to the petitioning member. If the court does find good cause, the court costs and the cost of the audit shall be assessed to the Alabama statewide trade association.
(b) In making its determination, the court may review among other matters, whether the Alabama statewide trade association (i) prepared its annual financial statements for its last three fiscal years (or such shorter period of existence), (ii) had an independent audit of its financial statements for its last three fiscal years (or such shorter period of existence), (iii) timely filed its federal or state income tax returns for its last three fiscal years (or such shorter period of existence), or (iv) incurred negative financial performance without a reasonable basis and/or board approval.
(Act 2024-413, §3.)
In addition to the restrictions on the use of membership lists under the Alabama Nonprofit Corporation Law:
(a) In an effort to prevent cybercrime, identity fraud, and financial crimes, an Alabama statewide trade association shall take reasonable precautions to safeguard member data, information, and contact information, including membership lists.
(b) An Alabama statewide trade association’s certificate of incorporation may provide that the Alabama statewide trade association may not disclose member lists and member data.
(c) The membership list of an Alabama statewide trade association is the property of the Alabama statewide trade association and shall be used solely for official use of the Alabama statewide trade association. The Alabama statewide trade association may provide member mailing lists for official business purposes consistent with its purpose and its certificate of incorporation.
(d) Electronic mail addresses and other electronic transmission information for members may be used in the historical and routine business of an Alabama statewide trade association and shall not be rented, sold, or otherwise provided to any other individual or organization for any other purpose unless authorized by the board of directors.
(e) Unless otherwise permitted by the certificate of incorporation or bylaws of an Alabama statewide trade association, a membership list or any part thereof may not be obtained or used by a member or members of the Alabama statewide trade association for any purpose unrelated to the interest of that member or members with respect to the member’s capacity as a member of the Alabama statewide trade association without the consent of the board of directors, including without limitation:
(1) to solicit money or property unless the money or property will be used solely to solicit the votes of the members in an election to be held by the Alabama statewide trade association;
(2) for any commercial purpose; or
(3) to be sold to, or purchased by, any person.
(Act 2024-413, §3.)
(a) A membership nonprofit corporation formed under or governed by the Alabama Nonprofit Corporation Law that elects to be governed by this chapter shall amend its certificate of incorporation by setting forth in its certificate of incorporation a statement that it is an Alabama statewide trade association as defined in Sections 10A-18-1.03(a)(1) through (6) and that it elects to be governed by this chapter.
(b) An Alabama statewide trade association shall cease to be governed by this chapter if it amends its certificate of incorporation by removing the statement required in Section 10A-18-1.09(a) and shall thereafter be governed solely by the Alabama Nonprofit Corporation Law, with no right to elect to be governed by this chapter thereafter.
(c) An Alabama statewide trade association shall cease to be governed by this chapter if it no longer meets the definition of an Alabama statewide trade association as set forth in Section 10A-18-1.03. If an Alabama statewide trade association ceases to be governed by this chapter in accordance with this section, then that Alabama statewide trade association shall thereafter be governed solely by the Alabama Nonprofit Corporation Law, with no right to elect to be governed by this chapter thereafter.
(Act 2024-413, §3.)
Any bishop of a diocese consisting wholly or in part of territory in Alabama may become a corporation sole with the power and authority defined in this article by proceeding according to the provisions of this article.
(Acts 1911, No. 429, p. 452; Code 1923, §7112; Code 1940, T. 10, §115; §10-4-1; amended and renumbered by Act 2009-513, p. 967, §324.)
To become a corporation sole, the bishop shall present to the Secretary of State of Alabama an application signed by the bishop which shall set forth:
(1) The name, official designation, and place of residence of the applicant, the name of the church of which the individual is a bishop, a copy in English of the commission, instrument, or document, if any, evidencing the right to the office, the date and place of the consecration and induction into office and that the bishop desires to become a corporation sole under this article;
(2) The name and territorial limits of the diocese, the date of its creation, a brief designation of the authority by which the diocese was created, that by which it may be modified and that by which its bishopric is filled, the terms of its bishop’s office and the instrument or document, if any, by which the bishop’s right to the office is evidenced, and the place where, and the official by whom, the original records thereof are kept;
(3) The name proposed for the corporation;
(4) The location of the principal office of the proposed corporation; and
(5) Any other matter relating to the incorporation which the applicant may choose to insert, not inconsistent with the Constitution and laws of Alabama.
The application shall be subscribed and sworn to by the bishop before an officer authorized by the laws of Alabama to take and certify oaths, who shall certify upon the application that he or she personally knows the applicant and believes the applicant to be the bishop as asserted in the application and that the applicant subscribed and swore thereto in the officer’s presence. The Secretary of State shall examine the application, and if he or she finds that the name proposed for the corporation is not identical with that of a person or of any other corporation in this state, or so nearly similar thereto as to lead to confusion and uncertainty, the Secretary of State shall receive and file it and shall record it in an appropriate book of record in his or her office.
(Acts 1911, No. 429, p. 452; Code 1923, §7113; Code 1940, T. 10, §116; §10-4-2; amended and renumbered by Act 2009-513, p. 967, §324.)
When the application has been made, filed, and recorded as provided in Section 10A-20-1.02, the applicant shall constitute a corporation sole under the name proposed in the application; and the Secretary of State shall make and issue to the applicant a certificate of incorporation pursuant to this article, under the seal of the state, and shall record the same with the application.
(Acts 1911, No. 429, p. 452; Code 1923, §7114; Code 1940, T. 10, §117; §10-4-3; amended and renumbered by Act 2009-513, p. 967, §324.)
A corporation sole under this article shall have the following powers:
(1) To have succession by its corporate name perpetually;
(2) To sue and be sued and defend;
(3) To make and use a corporate seal and alter the same at pleasure;
(4) To receive, take and hold, by sale, gift, lease, devise, or otherwise, real and personal estate of every description for charitable, educational, burial, religious, and church purposes and to manage and dispose of the same by any form of legal conveyance or transfer with full power and authority to borrow money and to convey by mortgage deed;
(5) To acquire, hold, purchase, receive by bequest or devise, and to convey or otherwise dispose of all such real, personal, and mixed property as may be necessary or convenient for the construction, operation, or maintenance of the diocesan enterprises or for the conduct or management of the business or businesses of the diocese of the bishop, or as the purposes of the bishop may require, and all other real, personal, or mixed property which shall have been bona fide conveyed, transferred, pledged, or mortgaged to the corporation by way of security for, or in, satisfaction of debts or purchased at sale under judgment obtained for the debts;
(6) To borrow money, issue notes, bonds, or other negotiable paper or mortgage, pledge, or otherwise transfer or convey its real, personal, and mixed property to secure the payment of money borrowed or any debt contracted;
(7) To appoint and employ officers and agents as the business of the corporation may require;
(8) To wind up and dissolve itself or be wound up and dissolved in the manner provided in this article;
(9) To establish and maintain churches, schools, orphanages, hospitals, and religious or benevolent institutions and to undertake and execute all business enterprises that the work of the diocese shall require;
(10) To undertake, execute, and carry on religious or diocesan charities, works, institutions, business, or enterprises in other states or foreign countries and to acquire, hold, transfer, mortgage, and convey, real, personal, or mixed property in those states and foreign countries; and
(11) To subscribe for, acquire, hold, and dispose of the stock, bonds, or other evidence of indebtedness of any other corporation of this or any other state or foreign countries and, while owner thereof, to exercise the rights, privileges, and powers of ownership, including the right to vote.
(Acts 1911, No. 429, p. 452; Code 1923, §7115; Code 1940, T. 10, §118; §10-4-4; amended and renumbered by Act 2009-513, p. 967, §324.)
When a bishop has become a corporation sole pursuant to this article, each of the successors in the bishopric shall succeed the bishop in the corporation upon making and filing with the Secretary of State an application for a certificate of succession setting forth:
(1) The succession; and
(2) A copy in English of the commission, instrument, or document evidencing the right to the succession, and the date and place of the consecration and induction into office, which certificate shall be subscribed, sworn to, and certified as provided for in the original application for incorporation.
Upon the issue of a certificate of succession as provided for in this section, the successor shall be clothed with all the authority and power of the original incorporator.
(Acts 1911, No. 429, p. 452; Code 1923, §7116; Code 1940, T. 10, §119; §10-4-5; amended and renumbered by Act 2009-513, p. 967, §324.)
A bishop who has become a corporation sole pursuant to this chapter shall be authorized to appoint an administrator to act for the corporation during the time as the bishopric shall for any reason be vacant. In the event a vacancy should occur in the bishopric and no administrator shall have been appointed, then the ecclesiastical authority to whom the bishop is spiritually subject shall have authority to appoint the administrator. An appointment of an administrator shall be in writing, signed by the maker, attested by at least two witnesses and acknowledged or proved, as provided for conveyances of land in this state. Upon the occurrence of a vacancy, the administrator may file in the office of the Secretary of State an application for certificate of administratorship, setting forth the vacancy and the administrator’s appointment, which application shall be subscribed, sworn to, and certified like the original application for incorporation, and shall attach thereto and file therewith the appointment and the acknowledgment or proof thereof. Upon the filing of an application of an administrator or of a successor in a corporation sole, the Secretary of State shall record the same in an appropriate book of record in the office of the Secretary of State and shall issue to the applicant a certificate of administratorship or successorship, as the case may be, under the seal of the state and shall record the same with the application therefor. From the issue of the certificate of administratorship, and until the certificate of succession has issued, the administrator shall be authorized to act for the corporation in the place of the bishop. As soon as the certificate of succession provided for in Section 10A-20-1.05 is issued, the administrator shall account for his or her administration and turn over all the corporation’s property to the successor.
(Acts 1911, No. 429, p. 452; Code 1923, §7117; Code 1940, T. 10, §120; §10-4-6; amended and renumbered by Act 2009-513, p. 967, §324.)
Any corporation sole under this article may be dissolved by the bishop who constitutes the corporation filing with the Secretary of State an application therefor, which shall be subscribed, sworn to, and certified as in the case of an application for incorporation. Upon the filing of the certificate, the corporation shall cease, and all its property rights and liabilities shall pass to the bishop, but no bishop shall be responsible for liabilities of a dissolved corporation in any greater sum than the value of property of the corporation which may come into possession of the bishop upon its dissolution. The Secretary of State shall record the application for dissolution and shall make and issue to the bishop, under the seal of the state, a certificate that the corporation is dissolved and shall record this certificate with the application for dissolution.
(Acts 1911, No. 429, p. 452; Code 1923, §7118; Code 1940, T. 10, §121; §10-4-7; amended and renumbered by Act 2009-513, p. 967, §324.)
Upon the presentation to the Secretary of State of any application provided for in this article, the applicant shall pay to the Secretary of State the fee prescribed to be paid to the Secretary of State by Chapter 1 as follows:
(1) for the filing of an application under Section 10A-20-1.02 to become a corporation sole, the fee prescribed for filing a certificate of formation;
(2) for the filing of an application under Section 10A-20-1.05 for a certificate of succession, the fee prescribed for filing a certificate of formation;
(3) for the filing of an application under Section 10A-20-1.06 for appointment of an administrator, the fee prescribed for filing a certificate of formation; and
(4) for the filing of an application to dissolve under Section 10A-20-1.07, the fee prescribed for filing a statement or articles of dissolution.
(Acts 1911, No. 429, p. 452; Code 1923, §7119; Code 1940, T. 10, §122; §10-4-8; amended and renumbered by Act 2009-513, p. 967, §324; Act 2020-73, §10.)
Any record kept or certificate issued in pursuance of this chapter, or a copy of any such record certified to be true by the legal custodian thereof, shall be received in evidence in all courts and shall be prima facie evidence of the facts therein recited or thereby shown.
(Acts 1911, No. 429, p. 452; Code 1923, §7120; Code 1940, T. 10, §123; §10-4-9; amended and renumbered by Act 2009-513, p. 967, §324.)
(a) The members of any church, conference of churches, religious society, educational society, benevolent, monument, or burial society, patriotic society, societies for the purpose of nature study or scientific research, society for establishing public parks or places of public recreation, societies for promoting knowledge, promoting arts, or promoting sciences, societies for purposes of like kind or the owners of a graveyard, or the trustees of any of the foregoing churches, conferences, institutions, or societies elected by the organization, or organizations, of the church, conferences, institution, association, or society desiring to become incorporated, shall adopt a resolution signifying the intention and elect not less than three trustees.
(b) The trustees shall, within 30 days after their election, deliver to the Secretary of State for filing, a certificate stating the corporate name selected, the names of the trustees, and the length of time for which they are elected, shall pay to the Secretary of State the filing fee under Chapter 1 for filing a certificate of formation. The members of the society, their associates, and successors are, from the filing of the certificate, incorporated by the name specified.
(Code 1852, §§1257-1260; Code 1867, §§1521, 1522, 1524, 1529, 1530; Code 1876, §§1991, 1992, 1994, 2000, 2001; Code 1886, §§1694, 1695; Code 1896, §§1302, 1303; Code 1907, §§3613, 3614; Acts 1919, No. 136, p. 117; Code 1923, §§7167, 7168; Acts 1927, No. 119, p. 83; Code 1940, T. 10, §§124, 125; Acts 1994, No. 94-573, p. 1046, §1; §10-4-20; amended and renumbered by Act 2009-513, p. 967, §326; Act 2020-73, §10.)
Corporations not of a business character created under this article or created by special act of the Legislature heretofore may acquire, hold, administer, distribute, or dispose of real and personal property, may take, receive, and acquire property by gift, devise, or bequest and hold, own, administer, use, distribute, and dispose of the property for the advancement, promotion, extension, or maintenance of the causes and objects as may be prescribed by the constitution and bylaws of the corporation in conformity with all lawful conditions imposed by the donor and may exercise other powers as are incident to private corporations. All such powers may be exercised by the corporation in its own right or as trustee or as personal representative.
(Code 1852, §1262; Code 1862, §1526; Code 1876, §1996; Code 1886, §1696; Code 1896, §1304; Code 1907, §3615; Acts 1911, No. 74, p. 49; Code 1923, §7169; Code 1940, T. 10, §126; Acts 1955, No. 393, p. 929; §10-4-21; amended and renumbered by Act 2009-513, p. 967, §326.)
(a) Unless otherwise clearly stated in the deed or other instrument under which any church corporation organized under this article derives title or unless afterwards approved by a majority of the adult members of the congregation of the church at a meeting held after announcement from the pulpit of the church at least seven days from the date of the announcement, the church corporation, whether heretofore or hereafter organized and incorporated under this article, shall be, and shall remain, a distinct and independent church corporation free from the regulation and control of any higher church body, denomination, or other organization with which it is now, or hereafter, associated or affiliated insofar as the management, control, disposition, or alienation of its real property is concerned.
(b) The provisions of this section shall in nowise be construed as conferring on any church organized under this article greater power of control over its real property than it possessed prior to its passage nor shall this section be construed as diminishing in any respect the control or supervision of the real property of the church organized under this article exercised by any higher church body, denomination, or other organization prior to its passage.
(Acts 1953, No. 647, p. 906, §§1, 2; §10-4-22; amended and renumbered by Act 2009-513, p. 967, §326.)
In all civil actions or legal proceedings, the service of process and papers on a trustee of the corporation is valid for the purpose of bringing the corporation into court or for the objects of the notice.
Code 1852, §1263; Code 1867, §1527; Code 1876, §1999; Code 1886, §1697; Code 1896, §1305; Code 1907, §3616; Code 1923, §7170; Code 1940, T. 10, §127; §10-4-23; amended and renumbered by Act 2009-513, p. 967, §326.)
The trustees, or a majority of them, or authorized agents of any church, conference of churches, societies, or associations organized by special charter or under the general laws of this state, may borrow money to an amount as may be authorized by a majority of the trustees or authorized agents and may, by mortgage or deed of trust, convey all or any part of the property owned, real or personal, or both, to secure the payment of any debt contracted by the trustees or authorized agents; but before the mortgage or deed of trust can be executed, a majority of the board of trustees or authorized agents shall have first authorized the incurring of the debt and the execution of the mortgage or deed of trust on all or part of the real or personal property, or both, of the church, conference of churches, society, or association, which authorization must be made at a meeting of the board of trustees or authorized agents specifically called for the purpose. Any church, conference of churches, society, or association may grant to its board of trustees or authorized agents the power to convey by mortgage or deed of trust any or all of its property, real or personal, it may then own or may thereafter acquire for the purpose of securing any debt contracted by the board of trustees. A certified copy of the minutes of the church, conference of churches, society, or association, or of the board of trustees or authorized agents, shall be prima facie evidence of the authority of the board of trustees or authorized agents.
(Code 1876, §1997; Code 1886, §1698; Code 1896, §1306; Code 1907, §3617; Acts 1919, No. 568, p. 826; Code 1923, §7171; Acts 1927, No. 119, p. 83; Code 1940, T. 10, §128; §10-4-24; amended and renumbered by Act 2009-513, p. 967, §326.)
The trustees or other authorized agents of any church, conference of churches, society, association, or other corporation organized under this article may sell and convey all or part of the property thereof, real or personal, as they may be authorized to do by resolution of the church, conference of churches, society, association, or other corporation assembled at a regular meeting or special meeting. If a special meeting, notice of the time, place, and object of the meeting must be given at least 10 days prior to the special meeting by posting notice at the place of regular meetings.
(Code 1923, §7172; Acts 1927, No. 119, p. 83; Code 1940, T. 10, §129; §10-4-25; amended and renumbered by Act 2009-513, p. 967, §326.)
A recital upon the minutes of the proceedings of a society or church that the notice required in Sections 10A-20-2.05 and 10A-20-2.06 was given, and of the vote upon the question before the meeting shall be evidence of the regularity of the meeting and of the proceedings therein.
(Code 1876, §1998; Code 1886, §1699; Code 1896, §1307; Code 1907, §3618; Code 1923, §7173; Code 1940, T. 10, §130; §10-4-26; amended and renumbered by Act 2009-513, p. 967, §326.)
Burial societies so incorporated may exercise all powers necessary for properly governing, beautifying, improving, and taking care of such graveyard, and may make bylaws, rules, and regulations as are proper and necessary to secure the objects.
(Code 1867, §1532; Code 1876, §2003; Code 1886, §1700; Code 1896, §1308; Code 1907, §3619; Code 1923, §7174; Code 1940, T. 10, §131; §10-4-27; amended and renumbered by Act 2009-513, p. 967, §326.)
When a graveyard is wholly under the control of persons belonging to one denomination or faith, the elder, deacon, minister, bishop, or priest who is the head of the denomination in the city, town, village, or county shall be ex officio the chair of the board of trustees. When a graveyard is under the control of persons of different denominations, the heads of the denominations interested shall be members of the board.
(Code 1867, §1533; Code 1876, §2004; Code 1886, §1701; Code 1896, §1309; Code 1907, §3620; Code 1923, §7175; Code 1940, T. 10, §132; §10-4-28; amended and renumbered by Act 2009-513, p. 967, §326.)
Whenever 10 or more ministers of the gospel or of any other religious faith or denomination desire to be legally formed into a body corporate, they shall file with the Secretary of State a declaration in writing, signed by them, setting forth the corporate name they desire to have, the name of the denomination or branch of the church of God with which they are in affiliation and to whose rules and articles of belief they conform, and shall pay the Secretary of State the filing fee required to be paid to the Secretary of State under Section 10A-1-4.31 for filing a certificate of formation, whereupon the Secretary of State, in the name of the State of Alabama, shall issue a certificate of incorporation or charter to the corporation.
(Code 1907, §3593; Code 1923, §7083; Code 1940, T. 10, §111; §10-4-40; amended and renumbered by Act 2009-513, p. 967, §328.)
All corporations formed under this article shall have and exercise these powers:
(1) To have perpetual succession by its corporate name;
(2) To take and grant property, to contract obligations, and to sue and be sued by its corporate name;
(3) To buy lands and other property, to receive grants of privileges and immunities, and hold the same for the benefit of its members and their successors;
(4) To receive gifts and grants in trust for the advancement of the religion or faith with which the corporation affiliates and education, and to execute the trusts;
(5) To lend any fund belonging to the corporation, or held by it in trust, and take security therefor, in bond with sureties, in pledges of personalty or in mortgages of property;
(6) To have a corporate seal;
(7) To make bylaws for the government of the corporation in conformity with the general laws and usage of that branch of the Christian church or of any other religious faith or denomination with which it affiliates;
(8) To prescribe the number and qualifications of its members and expel the same for cause; and
(9) To appoint and remove its officers and require bonds of its officers or agents, as it may deem proper.
(Code 1907, §3594; Code 1923, §7084; Code 1940, T. 10, §112; §10-4-41; amended and renumbered by Act 2009-513, p. 967, §328.)
Any annual conference that has heretofore been incorporated by an act of the Legislature of Alabama and desires to change its name or any corporation created under this article desiring to change its name may file with the Secretary of State a declaration in writing, showing the proposed amendment, and must pay the Secretary of State the filing fee required under Section 10A-1-4.31 to be paid to the Secretary of State for filing a certificate of amendment, whereupon the Secretary of State shall issue to the corporation a charter in its new name.
(Code 1907, §3595; Code 1923, §7085; Code 1940, T. 10, §113; §10-4-42; amended and renumbered by Act 2009-513, p. 967, §328.)
Whenever any annual conference has heretofore been organized according to the law of any branch of the Christian church or of any other religious faith or denomination but has not been incorporated, or the act of incorporation is for any reason believed to be defective or does not confer the powers necessary for the purpose of such body, the conference may become a body corporate under this article as the successor of the unincorporated or defectively incorporated body by incorporating in the declaration prescribed in Section 10A-20-3.01 the name of the body it desires to succeed; and upon the granting of a charter under this article, it shall be taken and held by the body or bodies named in the declaration and shall take and hold all the property, rights, and privileges of its predecessor as fully as though they had been granted to the succeeding corporation.
(Code 1907, §3596; Code 1923, §7086; Code 1940, T. 10, §114; §10-4-43; amended and renumbered by Act 2009-513, p. 967, §328.)
State conventions or state associations of churches, generally known as congregational churches, which have been heretofore incorporated under any general or special law of the state or which may be hereafter incorporated under any general law of this state, shall have and are invested with the following powers in addition to the powers heretofore conferred upon the corporations by general law or special acts of the Legislature. The incorporated conventions or associations may:
(1) In their corporate capacity, act in the intervals between state conventions by, and through, trustees, directors, or governing boards by whatever name called or designated;
(2) Through its constitution and bylaws or by resolution adopted by the convention confer upon the trustees, directors, or governing boards the power to do any and all acts and exercise any and all corporate powers conferred upon them by the convention which the convention itself might be permitted to exercise under its charter in accordance with the law while in session;
(3) Borrow money, execute notes and bonds therefor, and secure the payment of the same by mortgage or pledge of any of its funds, securities, or property;
(4) If it sees fit to do so, authorize the incorporation of a holding company or foundation through which it may transact all or any part of its financial affairs;
(5) Receive, purchase, own, possess, buy, and sell any and all necessary property, real, personal, and mixed, as shall be needful for its uses in the conduct of religious, educational, and charitable work;
(6) Accept gifts, donations, pledges, moneys, and other properties to any extent, and to any amount; and
(7) So long as its properties are exclusively devoted to religious, educational, and charitable purposes, the same shall be exempt from all state, county, municipal, and other taxes.
(Acts 1923, No. 56, p. 32; Code 1923, §§7121, 7122, 7125; Code 1940, T. 10, §§133, 134, 137; §10-4-60; amended and renumbered by Act 2009-513, p. 967, §330.)
Incorporated conventions or associations, as well as sectional or national conventions or associations of churches incorporated under the laws of any state, may establish schools, colleges, universities, hospitals, orphanages, or training courses for the ministry, missions, medical, sanitary, and other benevolent work, either directly or by authorizing boards of directors to be by the convention appointed, from time to time, to incorporate under general laws as a separate but subsidiary corporation. Any religious, educational, or charitable association or institution so established by the convention, whether separately incorporated or not, shall always be under the complete control and ownership of the conventions or of boards of trustees or directors now appointed, or hereafter from time to time appointed by the conventions, and may donate and convey property to them.
(Acts 1923, No. 56, p. 32; Code 1940, T. 10, §135; Acts 1947, No. 704, p. 542; §10-4-61; amended and renumbered by Act 2009-513, p. 967, §330.)
All conventions or associations, heretofore incorporated under general or special laws or hereafter organized under general laws, shall have perpetual existence, and may hereafter do and perform any and all acts pertaining to the spread and propagation of the gospel, the furtherance of education, and the doing of all acts of charity and benevolence that any unincorporated convention of natural persons shall be permitted lawfully to do under the laws of the state now in force or that may hereafter be enacted.
(Acts 1923, No. 56, p. 32; Code 1923, §7126; Code 1940, T. 10, §138; §10-4-62; amended and renumbered by Act 2009-513, p. 967, §330.)
Any incorporated convention or association, heretofore organized under any general or special law or that may be hereafter under general laws organized, shall not lose its corporate existence by reason of failure to elect or appoint trustees or boards of directors, and the charter of all the conventions and associations as were functioning and in operation on February 14, 1923, are confirmed, whether or not the organization may have been conducted in strict accordance with its charter, and all charters of the corporations legally existing on February 14, 1923, are hereby ratified and confirmed.
(Acts 1923, No. 56, p. 32; Code 1923, §7124; Code 1940, T. 10, §136; §10-4-63; amended and renumbered by Act 2009-513, p. 967, §330.)
(a) Any educational institution heretofore incorporated under special act of the Legislature or under the general laws of the state may amend its charter as follows:
(1) The trustees of the corporation must adopt a resolution embracing the desired amendment of the charter, which must be spread upon the minutes of the trustees;
(2) If the trustees are not self-perpetuating, but are appointed or elected by any persons or organization other than the trustees themselves, a resolution embracing the desired amendments to the charter shall be submitted to the persons or organization having the power to elect or appoint the trustees, and the resolution shall be approved by the persons or organization having the power to elect or appoint the trustees;
(3) The resolution must then be submitted to the Governor, together with the approval of the persons or organization having the power to appoint or elect the trustees, and if the amendment is approved by the Governor, he or she shall endorse his or her approval upon the resolution; and
(4) It must then be filed in the Office of the Secretary of State, and when so approved and filed, it shall become a part of the original charter of the institution.
(b) The amendment of the charter provided for in this section may include a change of name, power to confer degrees and grant diplomas, to hold real and personal property, to borrow money, mortgage or pledge property of the corporation, to change the number of trustees and the manner of appointing or electing the same; but if authorized to mortgage property and stock is owned in the institution, it must be only upon the consent of the holders of three fourths in value of the capital stock of the corporation, which must be expressed in writing and recorded as a deed or mortgage and executed in the form required for deeds, mortgages, or other conveyances.
(c) Before filing the amendment in the Office of the Secretary of State, the trustees must pay to the Secretary of State for the benefit of the State of Alabama the filing fee required under Section 10A-1-4.31 for filing an amendment to a certificate of formation.
(d) Upon the approval, filing, and payment of fees for the amendment, as provided for in this section, the Secretary of State shall issue to the trustees a certified copy of the amendment under the seal of the state.
(Code 1907, §§3589, 3590-3592; Acts 1915, No. 436, p. 382; Code 1923, §§7071, 7073-7075; Code 1940, T. 10, §§156, 158-160; §10-4-80; amended and renumbered by Act 2009-513, p. 967, §332.)
When a corporation organized under the laws of Alabama for educational purposes, which corporation has issued shares of stock, whether or not the charter or laws of Alabama authorized the issue of stock, and which has ceased to engage in the business for which it was organized has sold all or any part of its property, the proceeds of the sale or sales remaining after the payment of all the debts of the corporation may be distributed pro rata among the holders of the stock issued and outstanding.
(Acts 1915, No. 829, p. 945; Code 1923, §7072; Code 1940, T. 10, §157; §10-4-81; amended and renumbered by Act 2009-513, p. 967, §332.)
(a) Where the charter of any educational corporation organized under the laws of this state, general or special, provides for the issuance of stock and the stockholders are unknown or where the amount or number of shares are unknown, the property of the corporation may be disposed of as follows: The acting trustees or directors having peaceable charge of the business and property of the corporation, whether legally elected or not, may contract to sell or otherwise dispose of the property of the corporation in the manner as they may deem best to carry out the purpose of the corporation, which action must be concurred in by a majority of the acting trustees or directors.
(b) Within 30 days after making the contract or agreement, the trustees or directors shall cause to be filed in the name of the corporation, in the circuit court of the county in which the property or the principal part thereof is situated, a petition in writing, verified by affidavit, setting forth the purposes of the corporation and that the stockholders are unknown or that the amount or number of shares are unknown, setting out the sale or disposition contemplated and that, in the judgment of the trustees or a majority of them, the disposition is best to carry out the purposes of the corporation. If any of the stockholders are known, the petition shall also set out their names and residence if known.
(c) On the filing of the petition, the register or clerk shall cause publication to be made as to unknown or nonresident stockholders as provided by law for publication as to nonresidents on the filing of complaints, he or she shall issue a summons to all resident stockholders named in the petition, which shall be served as other summons and the same proceedings had as to all the known stockholders named in the petition as provided for complaints.
(d) Within the time allowed for pleading to complaints, any known or unknown stockholder may come in and propound a claim and contest the disposition if he or she deems proper, and the petition shall be heard as other complaints, and the disposition confirmed or set aside, or the disposition made, of the property as the equities of the case may require.
(e) If the petition is not contested within the time allowed for pleading to complaints, the same may be submitted to the judge on affidavits and the charter of the corporation, or a certified copy thereof, and the judge may enter an order thereon ratifying the sale or disposition, or modifying the same and prescribing the terms and restrictions as the judge may deem best for carrying out the purposes of the corporation and authorizing a conveyance of the property by the trustees or the president and secretary of the board, which shall convey to the grantee all the title of the corporation or of any stockholder thereof in the property subject to the restrictions contained in the order or the judge may refuse to ratify the disposition.
(f) If any money is paid under the order, the same shall be paid to the register or clerk to be distributed under the orders of the court to the parties entitled thereto on proper proof.
(g) Any party contesting the petition may, at any time within 42 days after the entry of the order, prosecute an appeal to the Supreme Court as on final judgments in accordance with the Alabama Rules of Appellate Procedure, and the appeal may also be taken by the acting trustees or directors in the name of the corporation.
(Acts 1911, No. 277, p. 327; Code 1923, §§7076-7082; Code 1940, T. 10, §§161-167; §10-4-82; amended and renumbered by Act 2009-513, p. 967, §332.)
Any nonstock nonprofit corporations organized for the purpose of establishing, maintaining, and operating a health care service plan under which health services are furnished to the public who become subscribers to the plan pursuant to contracts are authorized and shall be governed by the provisions of this article.
(Acts 1935, No. 544, p. 1157; Code 1940, T. 28, §304; Acts 1945, No. 50, p. 52, §1; Acts 1973, No. 1041, p. 1631, §1; §10-4-100; amended and renumbered by Act 2009-513, p. 967, §334.)
(a) The incorporators of any corporation to be governed by this article shall prepare and deliver to the Secretary of State for filing a certificate of formation stating an intention to become a corporation, which certificate of formation shall be signed by each of the incorporators and shall set forth:
(1) The name of the proposed corporation;
(2) The objects and purposes for which the corporation is organized;
(3) The location of the principal office of the corporation in this state; and
(4) The name and post office address of each incorporator, not less than three in number.
(b) The certificate of formation may also contain any other provisions, not inconsistent with the provisions of this article, which the incorporators may desire to insert for the regulation of the business or affairs of the corporation or which would be permitted nonprofit corporations by the Alabama Nonprofit Corporation Law. The filing of the certificate of formation shall be accompanied with payment of the filing fee payable to the Secretary of State in the amount prescribed by Chapter 1 for certificates of formation under Section 10A-1-4.31. The filing of the certificate of formation by the Secretary of State effects the creation of a corporation for the purpose of establishing, maintaining, and operating a health care service plan as provided for in this article.
(Acts 1935, No. 544, p. 1157; Code 1940, T. 28, §305; Acts 1973, No. 1041, p. 1631, §1; §10-4-101; amended and renumbered by Act 2009-513, p. 967, §334; Act 2020-73, §10.)
Any health care facility capable of entering into a binding contract may participate as a member of the corporation if the health care facility:
(1) Is approved by the appropriate state licensing agency having regulatory control over the facility; and
(2) Is accepted as a member by majority vote of the corporation’s board of directors.
The corporation and all health care facilities approved and accepted for membership shall enter into contracts which shall govern their respective rights and obligations and which shall be adopted and may be altered, amended, or repealed by majority vote of the board of directors of the corporation. The board of directors of the corporation may terminate the membership and the contract of any health care facility for any cause deemed proper by it at any time by a majority vote. Such member may be reinstated by a majority vote of the board of directors.
(Acts 1935, No. 544, p. 1157; Acts 1939, No. 491, p. 710; Code 1940, T. 28, §307; Acts 1973, No. 1041, p. 1613, §1; §10-4-102; amended and renumbered by Act 2009-513, p. 967, §334.)
The property and business of the corporation shall be managed by a board of directors with the powers and authority necessary or incidental to the purposes of the corporation. The board shall be composed of not less than 15 nor more than 27 directors. Public directors, who shall reflect the social, economic, and geographic characteristics of the population served by the corporation, shall constitute at least a majority of the board. Providers of health care and their representatives may also serve on the board, but in no event may constitute a majority thereof. Persons who derive income from the delivery or administration of health care or services shall not be eligible to serve as public directors. The bylaws of the corporation shall contain a provision requiring the board:
(1) To establish a procedure for the disclosure of and the determination of whether a person is a provider or a representative of a provider of health care and possible conflict of interest situations with respect to directors; and
(2) To establish and select an advisory committee consisting of not more than seven persons, not members of the board, who are knowledgeable in providing health services and whose functions shall be to consult with and advise the board of directors.
(Acts 1935, No. 544, p. 1157; Code 1940, T. 28, §306; Acts 1945, No. 50, p. 52, §2; Acts 1951, No. 946, p. 1615; Acts 1973, No. 1041, p. 1631, §1; §10-4-103; amended and renumbered by Act 2009-513, p. 967, §334.)
The power to adopt, alter, amend, or repeal bylaws shall be vested in the board of directors. The bylaws may contain any provisions for the regulation and management of the affairs of the corporation, including provisions for the number and selection of the board of directors, not inconsistent with this article.
(Acts 1935, No. 544, p. 1157; Code 1940, T. 28, §306; Acts 1945, No. 50, p. 52, §2; Acts 1951, No. 946, p. 1615; Acts 1973, No. 1041, p. 1631, §1; §10-4-104; amended and renumbered by Act 2009-513, p. 967, §334.)
The corporation may change its corporate name, the location of its principal office, or make other alteration, amendment, or change in its certificate of formation, as may be desired in the following manner:
(1) Its board of directors by a majority vote thereof, either in person or by proxy, at any regular meeting of the board, or at any special meeting called for the purpose, shall adopt a resolution or resolutions setting forth the respect or respects in which the certificate of formation of the corporation shall be altered, amended, or changed;
(2) The report thereof, certified by the president or the secretary of the corporation under corporate seal, if any, shall be delivered to the Secretary of State for filing; and
(3) Upon the filing of same, its certificate of formation shall be deemed to be altered, amended, or changed; provided, that the certificate of alteration, amendment, or change shall contain only the provisions as would be lawful and proper to insert in an original certificate of formation made at the time of making the amendment.
(Acts 1935, No. 544, p. 1157; Code 1940, T. 28, §306; Acts 1945, No. 50, p. 52, §2; Acts 1951, No. 946, p. 1615; Acts 1973, No. 1041, p. 1631, §1; §10-4-105; amended and renumbered by Act 2009-513, p. 967, §334; Act 2020-73, §10.)
Every corporation organized under this article shall procure from the Commissioner of Insurance a certificate of authority to do business, for which the corporation shall pay the sum of two hundred dollars ($200), and the certificates of authority shall be renewed thereafter on or before the first day of March of each year. The corporation may then enter into contracts with the public, subject to the restrictions contained in this article, for benefits under its health service plan. It shall be the duty of the corporation to enter into contracts with and issue certificates to those of the public who may desire to avail themselves of the benefits of the health service plan and who, under its rules and regulations, make application and are eligible therefor. The contracts may provide for more than one class of services or benefits, may designate the person or persons, or the class of persons, entitled thereto, may designate the health care facilities and providers which render the services provided for, and may specify the charge or dues required to be paid for the services or benefits. No corporation shall issue or sell any contract until the form of the same has been filed with the Commissioner of Insurance.
(Acts 1935, No. 544, p. 1157; Acts 1936, Ex. Sess., No. 169, p. 199; Code 1940, T. 28, §308; Acts 1945, No. 50, p. 52, §3; Acts 1973, No. 1041, p. 1631, §1; §10-4-106; amended and renumbered by Act 2009-513, p. 967, §334.)
No license, privilege, or other tax shall be charged any corporation organized under this article by or on behalf of any city or municipality of this state, and no license, privilege, or other tax in excess of the amount paid to the state under this article shall be charged any corporation by or on behalf of any county of this state.
(Acts 1935, No. 544, p. 1157; Acts 1939, No. 491, p. 710; Code 1940, T. 28, §314; §10-4-107; amended and renumbered by Act 2009-513, p. 967, §334.)
Any holder in good standing of a certificate for a health service may select any health care facility which may be designated by a corporation to render the necessary health service thereunder.
(Acts 1935, No. 544, p. 1157; Code 1940, T. 28, §309; Acts 1973, No. 1041, p. 1631, §1; §10-4-108; amended and renumbered by Act 2009-513, p. 967, §334.)
The rates, charges, fees, and dues to be paid by the public for benefits under a health service plan and for contracts or certificates covering same shall not be unreasonably high or excessive, shall be adequate to meet the liability assumed under the contracts and all expenses in connection therewith, shall be adequate for the safeness and soundness of the corporation, and shall take into account past and prospective loss experience. A health care service corporation shall file with the Commissioner of Insurance any change in its rates, charges, fees, and dues, and, as soon as reasonably possible after the filing has been made the commissioner shall, in writing, approve or disapprove the same, provided that, unless disapproved within 30 days after filing, the changed rates, charges, fees, or dues shall be deemed to be approved. The commissioner shall approve the rates, charges, fees, and dues which are consistent with and shall disapprove the rates, charges, fees, and dues which are not consistent with the standards and factors set forth in the first sentence of this section; provided, that notwithstanding the foregoing, when a filing of changes in rates, charges, fees, and dues for existing classifications of risks does not involve a change in the relationship between the rates and the expense portion thereof or does not involve a change of the element of expenses which are paid as a percentage of premiums and does not involve a change in rate relativities among the classifications on any basis other than loss experience, the changed rates in the filing shall become effective upon the date or dates specified in the filing and shall be deemed to meet the requirements of this section.
(Acts 1935, No. 544, p. 1157; Code 1940, T. 28, §311; Acts 1945, No. 50, p. 52, §4; Acts 1973, No. 1041, p. 1631, §1; §10-4-109; amended and renumbered by Act 2009-513, p. 967, §334.)
The Commissioner of Insurance or any of his or her designated deputies or examiners shall have the power of visitation and examination into the affairs of the corporation, shall have free access to all books, papers, and documents that relate to the business of the corporation, and may summon and qualify witnesses under oath and examine them in relation to the affairs, transactions, and conditions of the corporation and make public disclosure of his or her findings. The examination shall be made at the expense of the corporation.
(Acts 1935, No. 544, p. 1157; Code 1940, T. 28, §311; Acts 1945, No. 50, p. 52, §4; Acts 1973, No. 1041, p. 1631, §1; §10-4-110; amended and renumbered by Act 2009-513, p. 967, §334.)
Persons representing a health care service corporation organized under this chapter in writing or soliciting health care certificates for the corporation, and the health care service corporation with respect thereto, shall be subject to Chapters 7 and 8A of Title 27.
(Acts 1935, No. 544, p. 1157; Code 1940, T. 28, §310; Acts 1973, No. 1041, p. 1631, §1; Act 2001-702, p. 1509, §15; §10-4-111; amended and renumbered by Act 2009-513, p. 967, §334.)
Every health care service corporation shall deposit with, and thereafter maintain on deposit with, the Treasurer of the State of Alabama bonds of the United States government or of the State of Alabama, or of any subdivision thereof, or first mortgages on real estate situated in Alabama securing an indebtedness not in excess of 50 percent of the appraised value thereof, subject to the approval of the Commissioner of Insurance, in an amount to be determined as of the first day of January of each year as follows:
(1) Every company whose gross annual premium receipts from business done within this state for the preceding year ending December 31 are less than fifty thousand dollars ($50,000) shall so deposit and maintain securities of par and market value not less than five thousand dollars ($5,000);
(2) Every company whose gross annual premium receipts so computed are in excess of fifty thousand dollars ($50,000) and less than one hundred fifty thousand dollars ($150,000) shall so deposit and maintain the securities of par and market value not less than ten thousand dollars ($10,000);
(3) Every company whose such gross annual premium receipts so computed are in excess of one hundred fifty thousand dollars ($150,000) and less than two hundred fifty thousand dollars ($250,000) shall so deposit and maintain the securities of par and market value not less than fifteen thousand dollars ($15,000); and
(4) Every such company whose such gross annual premium receipts so computed shall exceed the sum of two hundred fifty thousand dollars ($250,000) shall so deposit and maintain the securities of a par and market value of not less than twenty thousand dollars ($20,000); provided, that before any company shall be licensed to, or shall, engage in any business in this state, it shall so make an initial deposit of the securities of a par and market value not less than three thousand dollars ($3,000).
The securities so deposited may from time to time with the approval of the Commissioner of Insurance and the Treasurer be replaced by other authorized securities of equal value. The deposit so maintained shall constitute a trust fund primarily for the security of persons holding certificates or policies of the company.
(Acts 1935, No. 544, p. 1157; Code 1940, T. 28, §312; §10-4-112; amended and renumbered by Act 2009-513, p. 967, §334.)
(a) On or before the first day of March of each year, every company transacting business under this article in this state shall file with the Commissioner of Insurance a statement showing the amount of gross dues received by it for business done in this state during the preceding calendar year ending December 31 and the number of contracts or certificates outstanding.
(b) The corporation shall, annually, on or before the first day of March, file in the Office of the Commissioner of Insurance a statement, verified by at least two of the principal officers of the corporation, showing its condition on December 31 next preceding, which shall be in the form, and shall contain the matters, as the Commissioner of Insurance shall prescribe. Every corporation shall set up as the liability for unperformed contracts or unearned dues on all outstanding certificates 95 percent of the unearned net dues or charges collected on the contracts computed on a monthly basis, by net dues is meant the amount received by the corporation less acquisition costs. Every corporation shall at all times hold assets equal to the aggregate amount so computed over and above all other liabilities, but the Commissioner of Insurance shall allow to the credit of every company in the account of its financial condition all assets as are, or can be made, available for the payment of claims or losses in Alabama.
(Acts 1935, No. 544, p. 1157; Acts 1939, No. 491, p. 710; Code 1940, T. 28, §§314, 315; §10-4-113; amended and renumbered by Act 2009-513, p. 967, §334.)
All decisions, findings, and orders of the Commissioner of Insurance made under this article shall be subject to review, revision, and reversal by proper proceedings brought in any court of competent jurisdiction within 30 days from the date of the decision, finding, or order; and the decision of the court may be reviewed by appeal.
(Acts 1935, No. 544, p. 1157; Code 1940, T. 28, §313; Acts 1973, No. 1041, p. 1631, §1; §10-4-114; amended and renumbered by Act 2009-513, p. 967, §334.)
(a) No statute of this state applying to insurance companies shall be applicable to any corporation organized under this article or to any contract made by the corporation, except the corporation shall be subject to the following:
(1) The provisions regarding annual premium tax to be paid by insurers on insurance premiums.
(2) Chapter 55 of Title 27.
(3) Article 2 and Article 3 of Chapter 19 of Title 27.
(4) Section 27-1-17.
(5) Chapter 56 of Title 27.
(6) Rules adopted by the Commissioner of Insurance pursuant to Sections 27-7-43 and 27-7-44.
(7) Chapter 54 of Title 27.
(8) Chapter 57 of Title 27.
(9) Chapter 58 of Title 27.
(10) Chapter 59 of Title 27.
(11) Chapter 54A of Title 27.
(12) Chapter 12A of Title 27.
(13) Chapter 2B of Title 27.
(14) Chapter 29 of Title 27.
(15) Chapter 62 of Title 27.
(16) Chapter 63 of Title 27.
(17) Chapter 45A of Title 27.
(18) Article 5 of Chapter 19 of Title 27.
(b) The provisions in subsection (a) that require specific types of coverage to be offered or provided shall not apply when the corporation is administering a self-funded benefit plan or similar plan, fund, or program that it does not insure.
(Acts 1939, No. 491, p. 710; Code 1940, T. 28, §316; Acts 1969, Ex. Sess., No. 27, p. 73; Acts 1993, No. 93-679, p. 1291, §8; Act 2000-595, p. 1185, §9; Act 2000-795, p. 1876, §6; Act 2001-445, p. 573, §1; Act 2001-477, p. 640, §10; Act 2001-702, p. 1509, §22; Act 2002-511, p. 1315, §1; Act 2004-502, p. 969, §7; Act 2007-389, p. 778, §5; Act 2008-502, p. 1106, §4; §10-4-115; amended and renumbered by Act 2009-513, p. 967, §334; Act 2012-298, p. 647, §3; Act 2012-429, p. 1170, §6; Act 2014-377, p. 1407, §7; Act 2014-324, p. 1151, §1; Act 2017-377, §1; Act 2018-406, §1(b)(1); Act 2019-98, §13; Act 2021-341, §3; Act 2021-236, §2; Act 2026-298, §2.)
(a) For the purposes of this section, the following terms have the following meanings:
(1) AFFILIATE. As defined in Section 27-29-1.
(2) CONTROL. As defined in Section 27-29-1.
(3) DEPARTMENT. The Department of Insurance of the State of Alabama.
(4) INSURER. Any person that meets the definition of insurer in either Section 27-1-2 or Section 27-29-1.
(5) MEMBER. As defined in Section 10A-3A-1.02.
(6) MEMBERSHIP INTERESTS. As defined in Section 10A-3A-1.02.
(7) NONPROFIT HOLDING CORPORATION. A domestic nonprofit corporation formed in connection with a reorganization which operates under Chapter 3A and which, directly or indirectly through another domestic nonprofit corporation that operates under Chapter 3A, holds all the membership interests in a health care service corporation organized under this article.
(8) PERSON. As defined in Section 10A-1-1.03.
(9) REORGANIZATION. A transaction or series of transactions in which a nonprofit holding corporation is created by or on behalf of a health care service corporation to hold, directly or indirectly through another domestic nonprofit corporation operating under Chapter 3A, a membership interest in the health care service corporation.
(10) SUBSIDIARY. As defined in Section 27-29-1.
(11) ULTIMATE CONTROLLING PERSON. A person that is not under the control of any other person.
(b)(1) Notwithstanding any other provision of this article, a health care service corporation, including a subsidiary of a health care service corporation, by means of one reorganization, may have a nonprofit holding corporation as the ultimate controlling person.
(2) The reorganization shall:
a. Be deemed an internal restructuring that does not result in a change of control of a health care service corporation or any subsidiary of a health care service corporation, including an insurer;
b. Not be deemed an acquisition or change of control of a health care service corporation or any subsidiary of a health care service corporation, including an insurer; and
c. Not be subject to Section 27-29-3 or Section 27-29-3.1.
(3) Notwithstanding any other provision of law, including this title or Chapter 29 of Title 27, as part of the reorganization, a health care service corporation may make an initial transfer of any combination of cash, investments, or equity ownership interests in an affiliate or a subsidiary to the nonprofit holding corporation or its subsidiary by dividend, distribution, or other means, subject to both of the following conditions:
a. The total statutory value of cash, investments, and ownership interests in an affiliate or a subsidiary, net of liabilities, shall not exceed 25 percent of the health care service corporation’s admitted assets as of its most current annual statement filed with the department.
b. The transfer shall be subject to any risk-based capital requirements imposed by the department which the health care service corporation is operating under at the time of the reorganization.
(4) A director, officer, or employee of the health care service corporation shall not receive any fee, commission, additional compensation, or other valuable consideration for aiding, promoting, or assisting in the reorganization.
(5) Compliance with this subsection and subsections (c) and (d) shall be the exclusive means of effecting the reorganization. Notwithstanding any other provision of law, including Chapter 29 of Title 27, no filings, notices, applications, or approvals, other than those filings and notices required in subsection (d), shall be required in connection with the reorganization, including a transfer pursuant to subdivision (b)(3).
(c)(1) Notwithstanding any law of this state, or provision to the contrary in the certificate of formation or governing bylaws, a health care service corporation, by action of its board of directors, may authorize the reorganization and undertake the actions provided in this subsection.
(2) Take all steps necessary under Chapter 3A to create a nonprofit holding corporation.
(3) Adopt amendments to the health care service corporation’s certificate of formation and bylaws to provide for, but not be limited to, any of the following:
a. A class of members.
b. Characteristics, qualifications, limitations, obligations, and rights of class members, including final distributions.
c. Conditions for admission of members and issuance of membership interests.
(d) Upon completion of the reorganization, a health care service corporation shall submit a notice of completion to the department, to which shall be attached all of the following:
(1) A description of the transactions that effect the reorganization.
(2) A copy of the amendments to the health care service corporation’s certificate of formation and bylaws.
(3) A copy of the nonprofit holding corporation’s certificate of incorporation.
(4) A pro forma balance sheet and income statement for the health care service corporation which demonstrates the financial position of the health care service corporation on the effective date of the reorganization.
(5) A pro forma balance sheet and income statement for the nonprofit holding corporation which demonstrates the financial position of the nonprofit holding corporation on the effective date of the reorganization.
(e)(1) As a result of being created pursuant to this section, a nonprofit holding corporation is:
a. Not deemed to be an insurance company, insurer, or a health care service corporation organized under this article;
b. Not otherwise subject to this article;
c. A nonprofit corporation that is subject to Chapter 3A and that has no members; and
d. The ultimate controlling person of the health care service corporation.
(2) No subsidiary or affiliate of a nonprofit holding corporation is subject to this article unless the subsidiary or affiliate is organized under this article as a health care service corporation.
(f) Notwithstanding any other provision of law, in addition to any transfer in connection with the reorganization under subdivision (b)(3), a nonprofit holding corporation may at any time directly or indirectly:
(1) Organize, acquire, hold, operate, manage, and invest in any person, including any insurer, subsidiary, or affiliate; and
(2) Enter into or engage in any operation, business, transfer, sale, purchase, exchange, loan, agreement, transaction, or other activity subject to compliance with any applicable provision of Chapter 3A or Chapter 29 of Title 27.
(g) A nonprofit holding corporation, no later than June 1 of each year, shall file with the department a group capital calculation for the preceding calendar year.
(h) The board of directors of a nonprofit holding corporation shall be comprised solely of individuals who are directors of the health care service corporation. No equity or ownership interest in the nonprofit holding corporation or any subsidiary thereof may be granted to any executive officer or any member of the board of directors of the nonprofit holding corporation or the health care service corporation.
(i) The department may exercise the authority provided under Section 27-2-7 and Section 27-2-19 for purposes of enforcing the nonprofit holding corporation’s compliance with this section.
(j)(1) The reorganization does not change the legal form of a health care service corporation or the health care service corporation’s certificate of authority to do business.
(2) All subscriber contracts and certificates issued by the health care service corporation shall remain in full force and effect.
(3) Upon reorganization, a health care service corporation shall continue to be subject to this article, except for all of the following:
a. Neither the reorganization nor any other transaction permitted by this section shall constitute or require a conversion of the health care service corporation pursuant to any law of this state.
b. In addition to a transfer in connection with the reorganization under subdivision (b)(3), the health care service corporation may approve and pay any direct or indirect dividend or distribution to the nonprofit holding corporation if the dividend or distribution satisfies the applicable standards for payment of a dividend or distribution pursuant to Sections 10A-3A-6.40, 27-29-4(e), and 27-29-5.
c. To the extent not otherwise addressed in, and not contrary to, the certificate of formation or bylaws of the health care service corporation as amended, or this section, all aspects of the membership relationship between the health care service corporation and its member nonprofit holding corporation resulting from the reorganization shall be governed by the applicable provisions of Chapter 3A.
d. A health care service corporation that has completed the reorganization is permitted, pursuant to Section 10A-1-8.02, and subject to any required filings and approvals under Chapter 29 of Title 27, to merge with any domestic or foreign nonprofit corporation if the health care service corporation is the surviving corporation in the merger.
(k) As to a person operating one or more hospitals as defined in Section 22-21-20 in the State of Alabama or operating any other direct health care provider in the State of Alabama, a nonprofit holding corporation, including its affiliates, shall not control, directly or indirectly, or own in whole or in part, directly or indirectly, the person. This subsection shall not prohibit the acquisition of such a person that is a foreign entity if the nonprofit holding corporation agrees to have divested the person’s direct health care provider in the State of Alabama within two years after the acquisition closes. As used in this subsection, neither the term “affiliate” nor the term “person” shall mean or include, and the restrictions in this subsection shall not apply with respect to, a health care service corporation organized under this article or a subsidiary thereof.
(l) Except if existing before or resulting from the reorganization, the nonprofit holding corporation, including its affiliates, shall not control, directly or indirectly, or own in whole or in part, directly or indirectly, any of the following entities providing health insurance in the State of Alabama:
(1) An insurance company licensed pursuant to Chapter 3 of Title 27.
(2) A health care service plan formed after calendar year 2025 and licensed pursuant to this article.
(3) A fraternal benefit society licensed pursuant to Chapter 34 of Title 27.
(4) A health maintenance organization licensed pursuant to Chapter 21A of Title 27.
(m) Notwithstanding anything to the contrary, nothing in this section is intended to, nor shall prevent, limit, or restrict in any way, any direct or indirect acquisition, ownership, transaction, business, investment, or other activity that is made, held, or conducted by a health care service corporation or a subsidiary of a health care service corporation that is otherwise permissible for that person under applicable law.
(n) Following the reorganization, if a transaction involving a health care service corporation: (i) requires notice to the commissioner of the department pursuant to Section 27-29-5(b)(1)a.1.; and (ii) exceeds five percent of the health care service corporation’s admitted assets as of the 31st day of December next preceding, then in addition to other applicable requirements under Section 27-29-5, the department shall provide the public with notice and an opportunity for a period of 30 days following the date of the public notice to provide written comments to the department on the transaction, and the transaction at issue may be entered into unless the commissioner of the department disapproves the transaction with the 30-day comment period.
(Act 2026-273, §1.)
For the purposes of this article, the following terms shall have the meanings respectively ascribed to them by this section:
(1) BOARD OF DIRECTORS. The board of directors of the corporation created under this article.
(2) CORPORATION. An Alabama industrial development corporation created under this article.
(3) FINANCIAL INSTITUTION. Any banking, mortgaging corporation or trust company, savings and loan association, insurance company or related corporation, partnership, foundation, pension funds or other institution engaged primarily in lending or investing funds.
(4) LOAN LIMIT. For any member, the maximum amount permitted to be outstanding at one time on loans made by the member to the corporation, as determined under the provision of this article.
(5) MEMBER. Any financial institution authorized to do business within this state which shall undertake to lend money to a corporation created under this article, upon its call and in accordance with the provisions of this article.
(6) STATE. The State of Alabama.
(Acts 1969, No. 322, p. 681, §1; §10-4-130; amended and renumbered by Act 2009-513, p. 967, §336.)
(a) Five or more financial institutions or persons, a majority of whom shall be residents of this state, who may desire to create an industrial development corporation under the provisions of this article for the purpose of promoting, developing, and advancing the prosperity and economic welfare of the state and, to that end, to exercise the powers and privileges provided in this article may be incorporated by delivering to the Secretary of State for filing a certificate of formation. The filing of the certificate shall be accompanied by a filing fee in the amount prescribed to be paid to the Secretary of State under Section 10A-1-4.31 in connection with the filing of a certificate of formation. The certificate of formation shall contain:
(1) The name of the corporation which shall include the words “industrial development corporation of Alabama.”
(2) The location of the principal office of the corporation, but the corporation may have offices in other places within the state as may be fixed by the board of directors.
(3) The purposes for which the corporation is founded, which shall be to promote, stimulate, develop, and advance the business prosperity and economic welfare of Alabama and its citizens, to encourage and assist through loans, investments, or other business transactions in the location of new business and industry in this state, to rehabilitate and assist existing business and industry, to stimulate and assist in the expansion of all kinds of business activity which will tend to promote the business development and maintain the economic stability of this state, to provide maximum opportunities for employment, encourage thrift, and improve the standard of living of the citizens of this state, to cooperate and act in conjunction with other organizations, public or private, in the promotion and advancement of industrial, commercial, agricultural, and recreational developments in this state, and to provide financing for the promotion, development, and conduct of all kinds of business activity in this state.
(4) The names and post office addresses of the members of the first board of directors, who, unless otherwise provided by the governing documents, shall hold office for the first year of existence of the corporation or until their successors are elected and have qualified.
(5) Any provision which the incorporators may choose to insert for the regulation of the business and for the conduct of the affairs of the corporation and any provision creating, dividing, limiting, and regulating the powers of the corporation, the directors, stockholders or any class of the stockholders, including, but not limited to, a list of the officers and provisions governing the issuance of stock certificates to replace lost or destroyed certificates; provided, that no provision shall be contained for cumulative voting for directors.
(6) The amount of authorized capital stock and the number of shares into which it is divided, the par value of each share and the amount of the capital with which it will commence business, and, if there is more than one class of stock, a description of the different classes, the names and post office addresses of the subscribers of stock, and the number of shares subscribed by each. The aggregate of the subscription shall be the minimum amount of the capital with which the corporation shall commence business, which shall be not less than one hundred thousand dollars ($100,000). The certificate of formation may also contain any provision consistent with the laws of this state for the regulation of the affairs of the corporation.
(7) The certificate of formation shall be in writing, subscribed by not less than three natural persons competent to contract, acknowledged by each of the subscribers before an officer authorized to take acknowledgments, and filed in the office of the Secretary of State for approval. A duplicate copy so subscribed and acknowledged may also be filed.
(8) The certificate of formation shall recite that the corporation is organized under this article.
(b) The Secretary of State shall not approve the certificate of formation for a corporation organized under this article until a total of at least five national banks, state banks, mortgage banks, federal savings and loan associations, state savings and loan associations, domestic building and loan associations, pension funds, or insurance companies authorized to do business within this state, or any combination thereof, have agreed in writing to become members of the corporation; and the written agreement shall be filed with the Secretary of State with the certificate of formation and the filing of same shall be a condition precedent to the approval of the certificate of formation by the Secretary of State. Whenever the certificate of formation shall have been filed in the office of the Secretary of State and approved by him or her and all filing fees and taxes prescribed by Alabama statutes, including Section 10A-1-4.31, have been paid, the subscribers, their successors, and assigns shall constitute a corporation, and the corporation shall then be authorized to commence business and stock thereof to the extent herein, or hereafter, duly authorized may from time to time be issued.
(Acts 1969, No. 322, p. 681, §2; §10-4-131; amended and renumbered by Act 2009-513, p. 967, §336; Act 2020-73, §10.)
(a) The first meeting of the corporation shall be called by a notice signed by three or more of the incorporators, stating the time, place, and purpose of the meeting, a copy of which notice shall be mailed or delivered to each incorporator at least five days before the day appointed for the meeting. The first meeting may be held without such notice upon agreement in writing to that effect, signed by all the incorporators. There shall be recorded in the minutes of the meeting a copy of the notice or of the unanimous agreement of the incorporators.
(b) At the first meeting, the incorporators shall organize by the choice, by ballot, of a temporary clerk, by the adoption of bylaws, by the election by ballot of directors, and by action upon such other matters within the powers of the corporation as the incorporators may see fit. The temporary clerk shall be sworn and shall make and attest a record of the proceedings. Ten of the incorporators shall be a quorum for the transaction of business.
(Acts 1969, No. 322, p. 681, §13; §10-4-132; amended and renumbered by Act 2009-513, p. 967, §336.)
In furtherance of its purposes and in addition to the powers now or hereafter conferred on business corporations by Alabama statutes, the corporation shall, subject to the restrictions and limitations contained in this section, have the following powers:
(1) To elect, appoint, and employ officers, agents, and employees to make contracts and incur liabilities for any of the purposes of the corporation; provided, that the corporation shall not incur any secondary liability by way of guaranty or endorsement of the obligations of any person, firm, corporation, joint stock company, association, or trust or in any other manner.
(2) To borrow money from its members and the small business administration and any other similar federal agency for any of the purposes of the corporation, to issue therefor its bonds, debentures, notes, or other evidences of indebtedness, whether secured or unsecured, and to secure the same by mortgage, pledge, deed of trust, or other lien on its property, franchises, rights, and privileges of every kind and nature, or any part thereof of interest therein, without securing stockholder or member approval.
(3) To make loans to any person, firm, corporation, joint-stock company, association, or trust and to establish and regulate the terms and conditions with respect to the loans and the charges for interest and service connected therewith; provided, however, that the corporation shall not approve any application for a loan unless and until the person applying for the loan shall show that the person has applied for the loan through ordinary banking channels and that the loan has been refused by at least one bank or other financial institution.
(4) To purchase, receive, hold, lease, or otherwise acquire and to sell, convey, transfer, lease, or otherwise dispose of real and personal property, together with the rights and privileges as may be incidental and appurtenant thereto and the use thereof, including, but not restricted to, any real or personal property acquired by the corporation from time to time in the satisfaction of debts or enforcement of obligations.
(5) To acquire the goodwill, business, rights, real and personal property, and other assets, or any part thereof or interest therein, of any persons, firms, corporations, joint-stock companies, associations, or trusts and to assume, undertake or pay the obligations, debts, and liabilities of any person, firm, corporation, joint-stock company, association, or trust, to acquire improved or unimproved real estate for the purpose of constructing industrial plants or other business establishments thereon or for the purpose of disposing of the real estate to others for the construction of industrial plants or other business establishments and to acquire, construct or reconstruct, alter, repair, maintain, operate, sell, convey, transfer, lease, or otherwise dispose of industrial plants or business establishments.
(6) To acquire, subscribe for, own, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of the stock, shares, bonds, debentures, notes, or other securities and evidences of interest in, or indebtedness of, any person, firm, corporation, joint-stock company, association, or trust and, while the owner or holder thereof, to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon.
(7) To mortgage, pledge, or otherwise encumber any property, right, or thing of value acquired pursuant to the powers contained in subdivision (4), (5), or (6) as security for the payment of any part of the purchase price thereof.
(8) To cooperate with, and avail itself of, the facilities of the United States Department of Commerce, the state planning and industrial development board, and any other similar state or federal governmental agencies and to cooperate with, assist, and otherwise encourage organizations in the various communities of the state in the promotion, assistance, and development of the business prosperity and economic welfare of the communities, of this state or of any part thereof.
(9) To do all acts and things necessary or convenient to carry out the powers expressly granted in this article.
(Acts 1969, No. 322, p. 681, §3; §10-4-133; amended and renumbered by Act 2009-513, p. 967, §336.)
Any financial institution may request membership in the corporation by making application to the board of directors on the form in the manner as the board of directors may require, and membership shall become effective upon acceptance of the application by the board.
(Acts 1969, No. 322, p. 681, §5; §10-4-134; amended and renumbered by Act 2009-513, p. 967, §336.)
(a) Membership in the corporation shall be for the duration of the corporation; provided, that upon written notice given to the corporation five years in advance, a member may withdraw from membership in the corporation at the expiration date of the notice.
(b) A member shall not be obligated to make any loans to the corporation pursuant to calls made subsequent to notice of the intended withdrawal of the member.
(Acts 1969, No. 322, p. 681, §6; §10-4-135; amended and renumbered by Act 2009-513, p. 967, §336.)
(a) The business and affairs of the corporation shall be managed and conducted by a board of directors, a president, a vice-president, a secretary, a treasurer, and other officers and agents as the corporation by its bylaws shall authorize. The board of directors shall consist of a number not less than 15 nor more than 21, as shall be determined in the first instance by the incorporators and thereafter annually by the members and the stockholders of the corporation. The board of directors may exercise all the powers of the corporation except such as are conferred by law or by the bylaws of the corporation upon the stockholders or members and shall choose, or appoint, all the agents and officers of the corporation and fill all vacancies except vacancies in the office of a director, which shall be filled as provided in this section. The board of directors shall be elected in the first instance by the incorporators and thereafter at the annual meeting, which annual meeting shall be held during the month of January or, if no annual meeting shall be held in the year of incorporation, then within 90 days after the approval of the certificate of formation at a special meeting as provided in this section. At each annual meeting or at each special meeting, held as provided in this section, the members of the corporation shall elect two thirds of the board of directors, and the stockholders shall elect the remaining directors. The directors shall hold office until the next annual meeting of the corporation, or special meeting held in lieu of the annual meeting after the election, and until their successors are elected and qualified, unless sooner removed in accordance with the provisions of the bylaws. Any vacancy in the office of a director elected by the members shall be filled by the directors elected by the members, and any vacancy in the office of a director elected by the stockholders shall be filled by the directors elected by the stockholders.
(b) Directors and officers shall not be responsible for losses unless the same shall have been occasioned by the willful misconduct of the directors and officers.
(Acts 1969, No. 322, p. 681, §9; §10-4-136; amended and renumbered by Act 2009-513, p. 967, §336.)
Any corporation organized under this article shall be a state development company, as defined in the Small Business Investment Act of 1958, or any other similar federal legislation, and shall be authorized to operate on a statewide basis.
(Acts 1969, No. 322, p. 681, §17; §10-4-137; amended and renumbered by Act 2009-513, p. 967, §336.)
(a) The stockholders and the members of the corporation shall have the following powers of the corporation:
(1) To determine the number of and elect directors as provided in Section 10A-20-7.07.
(2) To make, amend, and repeal bylaws.
(3) To amend this charter as provided in Section 10A-20-7.20.
(4) To dissolve the corporation as provided in Section 10A-20-7.22.
(5) To do all things necessary or desirable to secure aid, assistance loans, and other financing from any financial institutions and from any agency established under the Small Business Investment Act of 1958, or other similar federal laws now or hereafter enacted.
(6) To exercise the other of the powers of the corporation consistent with this article as may be conferred on the stockholders and the members by the bylaws.
(b) As to all matters requiring action by the stockholders and the members of the corporation, the stockholders and members shall vote separately thereon by classes and, except as otherwise provided in this article, the matters shall require the affirmative vote of a majority of the votes to which the stockholders present or represented at the meeting shall be entitled and the affirmative vote of a majority of the votes to which the members present or represented at the meeting shall be entitled.
(c) Each stockholder shall have one vote, in person or by proxy, for each share of capital stock held, and each member shall have one vote, in person or by proxy; except, that any member having a loan limit of more than one thousand dollars ($1,000) shall have one additional vote, in person or by proxy, for each additional one thousand dollars ($1,000) which the member is authorized to have outstanding on loans to the corporation at any one time as determined under subdivision (3)b. of Section 10A-20-7.11.
(Acts 1969, No. 322, p. 681, §7; §10-4-138; amended and renumbered by Act 2009-513, p. 967, §336.)
(a) Notwithstanding any rule at common law, any provision of any general or special law or any provision in their respective charters, agreements of association, certificate of formation, or trust indentures:
(1) Any person, including all domestic corporations organized for the purpose of carrying on business within this state, and further including, without implied limitation, public utility companies, insurance companies, foreign corporations licensed to do business within this state, all financial institutions, as defined in Section 10A-20-7.01, and all trusts, are hereby authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of any bonds, securities, or other evidences of indebtedness created by, or the shares of the capital stock of, the corporation and, while owners of the stock, to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon, all without the approval of any regulatory authority of the state, except as otherwise provided in this article; provided, however, that a financial institution which does not become a member of the corporation shall not be permitted to acquire any shares of the capital stock of the corporation;
(2) All financial institutions are hereby authorized to become members of the corporation and to make loans to the corporation as provided in Section 10A-20-7.11; and
(3) Each financial institution which becomes a member of the corporation is hereby authorized to acquire, purchase, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of any bonds, securities, or other evidences of indebtedness created by, or the shares of the capital stock of, the corporation and, while owners of the stock, to exercise all the rights, powers, and privileges of ownership, including the right to vote thereon, all without the approval of any regulatory authority of the state; provided, that the amount of the capital stock of the corporation which may be acquired by any member pursuant to the authority granted in this section shall not exceed 10 percent of the loan limit of the member.
(b) The amount of capital stock of the corporation which any member is authorized to acquire pursuant to the authority granted in this section is in addition to the amount of capital stock in corporations which the member may otherwise be authorized to acquire.
(Acts 1969, No. 322, p. 681, §4; §10-4-139; amended and renumbered by Act 2009-513, p. 967, §336.)
Each member of the corporation shall make loans to the corporation as and when called upon by it to do so on the terms and other conditions as shall be approved from time to time by the board of directors, subject to the following conditions:
(1) All loan limits shall be established at the one thousand dollars ($1,000) amount nearest to the amount computed in accordance with the provisions of this section.
(2) No loan to the corporation shall be made if immediately thereafter the total amount of the obligations of the corporation would exceed 50 times the amount then paid in on the outstanding capital stock of the corporation.
(3) The total amount outstanding on loans to the corporation made by any member at any one time, when added to the amount of the investment in the capital stock of the corporation then held by the member, shall not exceed:
a. Twenty percent of the total amount then outstanding on loans to the corporation by all members, including in the total amount outstanding amounts validly called for loan but not yet loaned.
b. The following limit, to be determined as of the time the member becomes a member on the basis of the audited balance sheet of the member at the close of its fiscal year immediately preceding its application for membership or, in the case of an insurance company, its last annual statement to the State Insurance Commissioner:
Two and one-half percent of the capital and surplus of commercial banks and trust companies;
One half of one percent of the total outstanding loans made by savings and loan associations, and building and loan associations;
Two and one-half percent of the capital and unassigned surplus of stock insurance companies, except fire insurance companies;
Two and one-half percent of the unassigned surplus of mutual insurance companies, except fire insurance companies;
One tenth of one percent of the assets of fire insurance companies; and
The limits as may be approved by the board of directors of the corporation for other financial institutions.
(4) Subject to subdivision (3)a., each call made by the corporation shall be prorated among the members of the corporation in substantially the same proportion that the adjusted loan limit of each member bears to the aggregate of the adjusted loan limits of all members. The adjusted loan limit of a member shall be the amount of the member’s loan limit, reduced by the balance of outstanding loans made by the member to the corporation and the investment in capital stock of the corporation held by the member at the time of the call.
(5) All loans to the corporation by members shall be evidenced by bonds, debentures, notes, and other evidences of indebtedness of the corporation, which shall be freely transferable at all times and which shall bear interest at a rate of not less than one quarter of one percent in excess of the rate of interest determined by the board of directors to be the prime rate prevailing at the date of issuance thereof on unsecured commercial loans.
(Acts 1969, No. 322, p. 681, §5; §10-4-140; amended and renumbered by Act 2009-513, p. 967, §336.)
Under no circumstances shall the credit of the state be pledged to any corporation organized under this article.
(Acts 1969, No. 322, p. 681, §16; §10-4-141; amended and renumbered by Act 2009-513, p. 967, §336.)
Notwithstanding the provisions of any other law of this state, now or hereinafter enacted, any corporation organized under this article shall be authorized to take and receive security by a mortgage, or otherwise, on property, real and personal.
(Acts 1969, No. 322, p. 681, §20; §10-4-142; amended and renumbered by Act 2009-513, p. 967, §336.)
Any tax exemptions, tax credits, or tax privileges granted to banks, savings and loan associations, trust companies, and other financial institutions by any general laws are granted to corporations organized pursuant to this article.
(Acts 1969, No. 322, p. 681, §18; §10-4-143; amended and renumbered by Act 2009-513, p. 967, §336.)
Every corporation organized and engaged in business under this article shall pay an annual state occupational license tax of fifty dollars ($50). Counties and municipalities are authorized in addition to levy an occupational license tax.
(Acts 1969, No. 322, p. 681, §19; §10-4-144; amended and renumbered by Act 2009-513, p. 967, §336.)
Each year, the corporation shall set apart as earned surplus not less than 10 percent of its net earnings for the preceding fiscal year until the surplus shall be equal in value to one half of the amount paid in on the capital stock then outstanding. Whenever the amount of surplus established herein shall become impaired, it shall be built up again to the required amount in the manner provided for its original accumulation. Net earnings and surplus shall be determined by the board of directors, after providing for such reserves as the directors deem desirable, and the determination of the directors made in good faith shall be conclusive on all persons.
(Acts 1969, No. 322, p. 681, §10; §10-4-145; amended and renumbered by Act 2009-513, p. 967, §336.)
The corporation shall not deposit any of its funds in any banking institution unless the institution has been designated as a depository by a vote of a majority of the directors present at an authorized meeting of the board of directors, exclusive of any director who is an officer or director of the depository so designated. The corporation shall not receive money on deposit.
(Acts 1969, No. 322, p. 681, §11; §10-4-146; amended and renumbered by Act 2009-513, p. 967, §336.)
The corporation shall be examined at least once annually by a certified public accountant and shall file reports of its condition annually with the Secretary of State, who in turn shall make copies of the reports available to the Governor. The corporation shall pay the actual cost of the examinations. The Alabama Banking Code applies where the code is not in conflict with this article.
(Acts 1969, No. 322, p. 681, §12; §10-4-147; amended and renumbered by Act 2009-513, p. 967, §336.)
Corporations organized under this article shall adopt the calendar year as their fiscal year.
(Acts 1969, No. 322, p. 681, §22; §10-4-148; amended and renumbered by Act 2009-513, p. 967, §336.)
(a) The certificate of formation may be amended by the votes of the stockholders and the members of the corporation, voting separately by classes, and the amendments shall require approval by the affirmative vote of two thirds of the votes to which the stockholders shall be entitled and two thirds of the votes to which the members shall be entitled; provided, that no amendment of the certificate of formation which is inconsistent with the general purposes expressed in this article, which authorizes any additional class of capital stock to be issued or which eliminates or curtails the right of the state Comptroller to examine the corporation or the obligation of the corporation to make reports as provided in Section 10A-20-7.18 shall be made; and provided further, that no amendment of the certificate of formation which increases the obligation of a member to make loans to the corporation, makes any change in the principal amount, interest rate, maturity date, in the security or credit position of any outstanding loan of a member to the corporation, affects a member’s right to withdraw from membership as provided in this article, or affects a member’s voting rights as provided in this article shall be made without the consent of each member affected by the amendment.
(b) Within 30 days after any meeting at which an amendment of the certificate of formation has been adopted, a certificate of amendment signed and sworn to by the president, treasurer, and a majority of the directors, setting forth the amendment and due adoption thereof, together with the filing fee prescribed by Section 10A-1-4.31 payable to the Secretary of State in connection with filing an amendment to a certificate of formation, shall be submitted to the Secretary of State who shall examine them and, if he or she finds that they conform to the requirements of this article, shall so certify and endorse his or her approval thereon. Thereupon, the certificate of amendment shall be filed in the office of the Secretary of State, and no such amendment shall take effect until the certificate of amendment has been filed.
(Acts 1969, No. 322, p. 681, §8; §10-4-149; amended and renumbered by Act 2009-513, p. 967, §336.)
The period of duration of the corporation shall be 50 years, subject, however, to the right of the stockholders and the members to dissolve the corporation prior to the expiration of the period as provided in Section 10A-20-7.22.
(Acts 1969, No. 322, p. 681, §14; §10-4-150; amended and renumbered by Act 2009-513, p. 967, §336.)
A corporation may, upon the affirmative vote of two thirds of the votes to which the stockholders shall be entitled and two thirds of the votes to which the members shall be entitled, dissolve the corporation. Upon dissolution of the corporation, none of the corporation’s assets shall be distributed to the stockholders until all sums due the members of the corporation as creditors thereof have been paid in full.
(Acts 1969, No. 322, p. 681, §15; §10-4-151; amended and renumbered by Act 2009-513, p. 967, §336.)
The provisions of Title 8 and any other laws of this state regulating the issue, registration, and sale of securities shall not apply to any security issued by a corporation organized under this article.
(Acts 1969, No. 322, p. 681, §21; §10-4-152; amended and renumbered by Act 2009-513, p. 967, §336.)
For the purposes of this article, the following terms shall have the meanings respectively ascribed to them by this section:
(1) AFFILIATED ORGANIZATIONS. Organizations or boards deriving their powers, functions, funds, and property directly from the parent organization, as defined in this section, or from its law-making body and does not mean organizations or boards organized under or answerable to any state organization, board, convention, or authority constituting a branch of the parent organization.
(2) CHANGE OF SOCIAL POLICIES. Any substantial and material change in or departure from the rules, social creed, jurisdictional system, authoritative pronouncements, or other fraternal law relating to the social standards, practices, or policies of the parent organization or its affiliated institutions, as the same existed at the time of affiliation or merger of the local organization, and which change is contrary to the way of life of the majority group.
(3) FRATERNAL ORDER. An organization wherein a group of men, women or men and women, are bound together for the purposes of advancing their educational, social or other benefits; also the relation of persons associating on the footing of brothers; also, a body or class of persons having common purposes and interests; brothers including sisters and sisters including brothers.
(4) FRATERNAL PROPERTY. All property, real, personal, or mixed, belonging to, or in the possession of, the local order, as defined in this section, or title to which is vested in the local order, or in trustee for the use and benefit of the local fraternal order or a corporation if the local fraternal order is incorporated, whether the use and benefit are expressed in title instruments or not.
(5) LOCAL FRATERNAL ORDER. Any chapter, order, club, lodge, association, mission, subdivision, active, alumni, or fraternal brotherhood, whether or not incorporated, in any city, town, or county in Alabama, which holds title to, or a fiduciary or trust interest in, property or the income therefrom and which is affiliated with, or recognizes the rules, administrative, jurisdictional, or other superior authority of, a larger denominational body of the same order. The term “local order” shall also include any organization organized in Alabama for fraternal, charitable, or educational purposes having title to, administrative supervision, or control, in trust, over property subject to any such higher jurisdiction or authority.
(6) MAJORITY GROUP. Sixty-five percent or more of membership, resident in Alabama, enrolled in any local fraternal order, not including members who are minors under the age of 19 years at the date of filing the complaint or, with respect to any corporation or group organized in Alabama for fraternal, charitable, or educational purposes, “majority group” means 65 percent, or more, of the adult membership resident in Alabama of any governing or voting board having voting authority in the control or administration of the organization.
(7) PARENT FRATERNAL ORDER. The larger denominational body or authority having jurisdiction over or affiliated with the local fraternity, alumni association, chapter, camp, lodge, mission, or fraternal order, having under the plan of organization of the particular fraternal order jurisdiction in the matter or practice of faith, rules, membership, property, social creed or pronouncements, or other organic or administrative function of that fraternal order, the designation “parent organization” being applicable to the authority whose action or interpretation is made the basis for relief and protection hereunder.
(8) TRUST CLAUSE. Any clause or provision inserted in a deed, transfer, will, or contract or which is required by the law or rules of the parent organization to be so inserted providing that property acquired by the local order, or in the name of trustees or a corporation for the use of the local organization, shall be held in trust for the use and benefit of the parent organization, or one or more of its affiliates, members, officers, or agents, or a clause in the deed, will, fraternal law, or rules providing substantially as follows:
In trust, that the premises shall be used, kept, and maintained as a place of fraternal work of the parent organization or as a place of residence for the use and occupancy of members of the parent organization subject to the rules, usage, and fraternal appointments of the order as from time to time authorized and declared by the law-making bodies of the fraternal organization.
(9) WITHDRAW or WITHDRAWAL. The voluntary action of the majority group taken or initiated to sever the affiliation, connection, or fraternal ties of the local organization with or from the parent organization as authorized by this article.
(Acts 1961, Ex. Sess., No. 176, p. 2137, §1; §10-4-170; amended and renumbered by Act 2009-513, p. 967, §338.)
The right and equity are hereby recognized and declared on behalf of the majority group of any local organization owning title to or an interest in fraternal property to preserve and protect the same from impairment or loss, to prevent fraternal property held subject to the trust clause from being converted to or used for an unintended or different use or purpose due to a change of social policies of the parent organization, and to be relieved of a material miscarriage of intent or understanding, failure of or departure from the intent or understanding of the local organization, or the majority group thereof, with respect to its use of the fraternal property or the conduct of its traditional social practices due to a change of social policies of the parent organization or of any one or more of its affiliated organizations.
(Acts 1961, Ex. Sess., No. 176, p. 2137, §2; §10-4-171; amended and renumbered by Act 2009-513, p. 967, §338.)
(a) The majority group of any local organization may withdraw from the parent organization and, upon withdrawal, shall be permitted to devote the fraternal property to the uses originally intended free of the influence of the trust clause; provided, that the facts upon which the right of withdrawal is conditioned under this section shall be judicially determined to exist in and by a judicial proceeding as provided for in this article.
(b) While this article is not intended to control any rules, fraternal, educational, social, or other formula or practice of the parent organization, one of its purposes is to afford an effective remedy and procedure for the preservation and protection of trust, charitable, educational, or fraternal property from impairment or loss thereof when the intended trust use thereof is threatened as a proximate result of subsequent action by the parent organization inconsistent with the basic intent or assumption inherent in, or expressed and fixed before, during, or in, the acquisition or dedication thereof.
(Acts 1961, Ex. Sess., No. 176, p. 2137, §3; §10-4-172; amended and renumbered by Act 2009-513, p. 967, §338.)
Whenever, as a result of action of the parent organization, any of its authoritative subdivisions, or its law-making body the majority group of any local organization shall determine that there has been a change of social policies, within the meaning of this section, or that any act, declaration, law, policy, social creed, or jurisdictional system of the parent organization is contrary to the basic intent, understanding, or basic assumption existing between the contributors, donors, or grantors of the fraternal property and the local organization or between the contributors, grantors, or donors and any trustee of property held for the benefit of the local organization or held by, or for, the use of the local organization subject to the trust clause and whenever a majority group shall find and determine that the act, declaration, or policy of the parent organization is not only contrary to the basic intent, understanding, or assumption, but that acquiescence therein would be contrary to the welfare of the local organization or the peace, order, friendliness, or goodwill within the membership of the local organization, be inconsistent with the effective and harmonious continuation of fraternal work, or involve the organization in public controversy, thereupon the majority group shall have the right, without sacrifice or loss of any title, interest, or matured equity or rights in property, funds, or benefits, to set up a local organization or unit independent of the authority of the parent organization, and the local organization or unit so set up shall be in corporate form as may be provided for under the laws of Alabama for the formation of fraternal or nonprofit charity corporations.
(Acts 1961, Ex. Sess., No. 176, p. 2137, §4; §10-4-173; amended and renumbered by Act 2009-513, p. 967, §338.)
Upon resolution or written declaration by the majority group, upon giving 30 days’ notice to the parent organization, and upon giving like notice to the organization membership or the official governing body of the local organization, a corporation formed by the majority group shall be authorized to institute a civil action on behalf of itself and the majority group at the cost of the plaintiff if none of the defendants contest the action, otherwise, the costs to be taxed within the discretion of the circuit court of the county in which the local organization is located, for a judicial finding and declaratory action as provided in this section. Such proceeding or action shall state the facts as to the basis for relief from miscarriage of basic intent and understanding, as provided in this article, and any other factors or equities entitling the plaintiff to the relief sought.
(Acts 1961, Ex. Sess., No. 176, p. 2137, §5; §10-4-174; amended and renumbered by Act 2009-513, p. 967, §338.)
Service of process in an action or proceeding may be had on the local organization by service on its administrative authority, one or more senior or representative members or other similar authority of the organization by service on the parent organization by serving any representative official, members, or employees thereof, by service on the trustee, person, or corporation in which the record title to the fraternal property sought to be affected by the proceeding is held or vested, and by service on any other defendant having a justifiable interest in the relief sought. Service by publication or otherwise may be had on any nonresident in the manner provided in the Alabama Rules of Civil Procedure pertaining to class actions and other methods of service of process.
(Acts 1961, Ex. Sess., No. 176, p. 2137, §6; §10-4-175; amended and renumbered by Act 2009-513, p. 967, §338.)
The plaintiff in an action may aver as a separate aspect or equity that the parent organization has made or sanctioned material changes in the laws, rules, social creed, or jurisdictional system with respect to social standards, practices, or policies which changes are opposed to the views, beliefs, or way of life of the majority group and which changes are substantially and materially different from the status of the laws, rules, social creed, or jurisdictional system of the parent organization with respect to its social standards, practices, or policies existing at the time the local organization became affiliated or merged with the parent organization, and may further aver that changes, insofar as they negate or depart from the basic intent and understanding of the majority group, are constructively fraudulent, collusive, or arbitrary, as those terms are defined or referred to in the law. Upon proof of the averments, the plaintiff shall be entitled to the relief provided by this article.
(Acts 1961, Ex. Sess., No. 176, p. 2137, §8; §10-4-176; amended and renumbered by Act 2009-513, p. 967, §338.)
If on final hearing the court shall find that the organization of the plaintiff corporation, subject to such further or amended conditions or provisions as the court may require or approve, is equitable and appropriate for administration as a fraternal or charitable trust and that the withdrawal of the fraternal property from subjection to the action complained of is equitable and appropriate under the cy-pres doctrine or otherwise, the court shall enter judgment accordingly, declaring the status, rights, and equities involved and, on final compliance, shall order its approval for the record, as well as grant any other relief appropriate in the premises.
(Acts 1961, Ex. Sess., No. 176, p. 2137, §7; §10-4-177; amended and renumbered by Act 2009-513, p. 967, §338.)
The complaint in any action authorized by this article shall state whether or not the local organization obtained from the parent organization or any of its affiliated organizations a loan or grant of funds with which to defray, in whole or in part, the cost of constructing or acquiring any of the buildings or real estate included in the fraternal property sought to be withdrawn, and if the loan or grant was obtained within 20 years prior to filing the complaint, then it shall aver the amount thereof and the date the loan or grant was obtained and whether, if it be a loan, it is secured by a lien instrument. If the court grants the right to withdraw as requested in the complaint and further grants a confirmation of title to property in the local organization, free of the trust clause, it shall determine the amount of the unsecured loan or grant and that the same was made within 20 years of filing the complaint, if that be true, and shall order that the loan, if unsecured, or grant shall be repaid without interest to the date of the judgment, within a reasonable time to be fixed by the court, as a condition to granting the relief sought and shall fix a lien on the fraternal property of the local organization to secure the repayment of the unsecured loan or grant.
(Acts 1961, Ex. Sess., No. 176, p. 2137, §9; §10-4-178; amended and renumbered by Act 2009-513, p. 967, §338.)
Nothing in this article shall be construed to affect the validity of any existing lien or mortgage on the fraternal property or part thereof.
(Acts 1961, Ex. Sess., No. 176, p. 2137, §10; §10-4-179; amended and renumbered by Act 2009-513, p. 967, §338.)
Ten or more persons desiring to associate themselves together for nonprofit purposes in the sense of not paying interest or dividends on stock, but for mutual benefit through the application of cooperation, single-tax, or other economic principles, may become a body corporate in the manner following:
(1) The persons proposing to form the corporation shall deliver to the Secretary of State for filing a declaration in writing, setting out the name of the proposed corporation, the names of the charter members, and the purposes of the corporation, which declaration shall constitute its corporate charter, together with a filing fee in the amount prescribed by Chapter 1 for filing a certificate of formation.
(2) Upon the filing of such declaration, the corporation’s existence begins, which shall be perpetual, subject to revocation at any time by the Legislature.
(Code 1907, §3573; Code 1923, §7046; Code 1940, T. 10, §168; Acts 1966, Ex. Sess., No. 445, p. 602, §1; Acts 1976, No. 584, p. 795; §10-4-190; amended and renumbered by Act 2009-513, p. 967, §340; Act 2020-73, §10.)
Any corporation organized pursuant to this article may elect the officers as it may deem necessary, in such manner and for the terms as it may provide, and remove the same at any time, and adopt a constitution and bylaws as it may see fit not in conflict with the Constitution and laws of this state.
(Code 1907, §3573; Code 1923, §7046; Code 1940, T. 10, §168; Acts 1966, Ex. Sess., No. 445, p. 602, §1; Acts 1976, No. 584, p. 795; §10-4-191; amended and renumbered by Act 2009-513, p. 967, §340.)
A corporation formed pursuant to this article shall have the power to buy, sell, lease, and mortgage real estate, to build and operate wharves, boats, and other means of transportation and communication, to build, erect, and operate waterworks, electric lighting and power companies, libraries, schools, and parks, and to do any other lawful thing, incident to its purpose for the mutual benefit of its members and may admit other persons to participate in its benefits as it may see fit and upon conditions as it may impose.
(Code 1907, §3573; Code 1923, §7046; Code 1940, T. 10, §168; Acts 1966, Ex. Sess., No. 445, p. 602, §1; Acts 1976, No. 584, p. 795; §10-4-192; amended and renumbered by Act 2009-513, p. 967, §340.)
All associations or corporations heretofore or hereafter organized pursuant to this article for the purpose of operating waterworks for unincorporated areas shall be exempt from the payment of all state, county, municipal, or other ad valorem taxes and shall be exempt from paying any state or county license tax on any gross receipts of the association or corporation.
(Code 1907, §3573; Code 1923, §7046; Code 1940, T. 10, §168; Acts 1966, Ex. Sess., No. 445, p. 602, §1; Acts 1976, No. 584, p. 795; §10-4-193; amended and renumbered by Act 2009-513, p. 967, §340.)
(a) Any corporation organized under this article for the purpose of demonstrating the single tax principal shall, as soon as practicable after August 25, 1976, amend its corporate charter to provide that it will recognize an association of its lessees and will deal with representatives of the association on any and all matters relating to leased corporate lands in any manner.
(b) Any corporation organized under this article for the purpose of demonstrating the single tax principal shall, as soon as practicable after August 25, 1976, amend its corporate charter to provide that any lease agreement covering real estate shall provide that the lessee may give written notice to the lessor that the lessee objects to the amount of the rent claimed or requested by the lessor. Upon receipt of the written notice, the lessor and the lessee, or any association of lessees when the individual lessee so desires, shall each designate a person to be an arbitrator and the two thus chosen shall select a third. These arbitrators shall meet and, after a hearing wherein both the lessor and the lessee are allowed to present evidence, they shall fix the amount of the rent by arbitration. This determination shall be binding on both parties.
(c) Any corporation organized under this article for the purpose of demonstrating the single tax principal shall, as soon as practicable after August 25, 1976, amend its corporate charter to provide that any lease agreement covering real estate shall provide that the lessee may give written notice to the lessor that the lessee objects to the amount of the compensation for sale or transfer of improvements imposed or requested by the lessor. Upon receipt of the written notice, the lessor and the lessee, or any association of lessees when the individual lessee so desires, shall each designate a person to be an arbitrator and the two thus chosen shall select a third. These arbitrators shall meet and, after a hearing wherein both the lessor and the lessee are allowed to present evidence, they shall fix the amount of the compensation by arbitration. This determination shall be binding on both parties. The arbitration shall be to determine what is the fair market value.
(d) The provisions of this section shall apply to all leases in effect on August 25, 1976, in the State of Alabama where the lessor is a corporation organized under this article.
(e) Subsections (b) and (c) of this section shall apply to all leases executed after August 25, 1976, applying to real estate in the State of Alabama where the lessor is a corporation organized under this article.
(Acts 1976, No. 282, p. 314; Acts 1976, No. 606, p. 822; §10-4-194; amended and renumbered by Act 2009-513, p. 967, §340.)
(a) Notwithstanding any provision to the contrary in the certificate of formation, other governing instrument, or under any other law of this state, and except as otherwise provided by court order, or by a provision in the certificate of formation or other governing instrument, which in either case is entered or made after August 11, 1971, and expressly limits the applicability of this section, a corporation which is, or is treated as, a private foundation, as defined in Section 509 of the Internal Revenue Code of 1986, as amended, during the period it is, or is treated as, a private foundation:
(1) Shall not engage in any act of self-dealing as defined in Section 4941 (d) thereof;
(2) Shall distribute, for the purposes specified in its certificate of formation, for each taxable year not less than the amounts at the time and in the manner as not to become subject to the tax on undistributed income imposed by Section 4942 thereof;
(3) Shall not, if Section 4943 thereof is applicable, retain any excess business holdings as defined in subsection (c) of that section beyond the period permitted by that section;
(4) Shall not make any investment in a manner as to subject it to tax under Section 4944 thereof; and
(5) Shall not make any taxable expenditures as defined in Section 4945 (d) thereof.
(b) Nothing in this section shall impair the rights and powers of the courts or the Attorney General of this state with respect to any corporation described in this section. The provisions of this section shall not apply to any corporation to the extent that a court of competent jurisdiction shall determine that the application would be contrary to the terms of the certificate of formation or other instrument governing the corporation or governing the administration of charitable funds held by it and that the same may not properly be changed to conform to this section.
(c) All references to sections of the Internal Revenue Code of 1986, as amended, shall include future amendments to the sections and corresponding provisions of future internal revenue laws.
(Acts 1971, No. 230, p. 533, §§1-3; Acts 1971, No. 2275, p. 3664, §§1-3; §10-4-210; amended and renumbered by Act 2009-513, p. 967, §342; Act 2020-73, §10.)
(a) Any incorporated medical association of the State of Alabama, Alabama Dental Association, Alabama Pharmaceutical Association, or other corporations organized similarly to the corporation or of a similar kind may alter, amend, or extend its charter, or may do any two or all of these, in the manner following:
(1) A written resolution setting out the name of the corporation and embodying the proposed alterations, amendments, or extensions shall be submitted to a lawful annual meeting of the corporation or other lawful meeting of the corporation and adopted by a two-thirds vote of those present at the meeting and lawfully entitled to vote on business matters coming before the meeting;
(2) The president, or some other executive officer of the corporation, and the secretary thereof shall prepare, sign, and acknowledge as conveyances are acknowledged and deliver to the Secretary of State for filing a certificate containing a copy of the resolution and certifying that it was adopted in the manner above provided; and
(3) Upon the filing of the certificate, together with payment of the filing fee prescribed by Chapter 1 for filing an amendment to a certificate of formation, the charter of the corporation shall stand altered, amended, or extended as therein shown.
(b) Any such alteration, amendment, or extension under subsection (a), may be made by changing or adding to the language of the act, or acts, of incorporation, declaration of incorporation, or certificate of incorporation of the corporation, as the case may be, or by changing or adding to the language of both or all of them. When any such corporation is now or hereafter may be charged by law with public or quasi-public functions, alterations to, or amendments or extensions of its charter shall in no manner add to, detract from, or modify the functions or the rights and duties of the corporation in reference thereto, but no alteration, amendment, or extension of the charter of any corporation so charged by law shall be made which will interfere with the discharge of the functions.
(Acts 1915, No. 155, p. 160; Code 1923, §§6983-6985; Code 1940, T. 10, §19; §10-1-1; amended and renumbered by Act 2009-513, p. 967, §344; Act 2020-73, §10.)
(a) Unless otherwise provided, any corporation, not of a business character, may alter or amend its charter whenever not less than three-fourths in number of its members, in case of corporations having no central or general governing body, or where the corporations have a central or general governing body, then whenever not less than three-fourths of the first four principal officers of the central or general governing body, shall deliver to the Secretary of State for filing, together with a filing fee in the amount prescribed in Chapter 1 for an amendment to a certificate of formation, a declaration in writing signed by them setting forth:
(1) When the corporation was organized, its name and what changes, if any, it is desired to make in the name;
(2) The purposes of the corporation as the same are set forth in the original declaration of incorporation, and the alterations and the amendments thereof, if any are desired;
(3) If it is desired to increase its powers as to the holding of real estate in area and value and of personal property in value, the declaration shall set forth the limitations prescribed as to these matters in the original certificate of formation, and any amendments heretofore made thereto, and shall also set forth the increase in area of real property it is desired to acquire and hold, together with the purposes for which it is desired, and the increase in value of personal property desired to be acquired and held, and the purpose for which it is desired, and if the purposes as so declared are not violative of any of the laws or public policies of the State of Alabama, the filing of the declaration shall authorize and empower the corporation to acquire and hold such additional real estate and personal property.
But no such change or alteration in the charter or the character of any corporation shall authorize it to exercise any power or to do any acts which similar corporations are not authorized to do under the laws existing at the time such alteration or amendment may be made, nor to decrease its capital stock below the minimum fixed by existing laws.
(b) The declaration provided in subsection (a) shall be verified by the affidavit of some one or more of the signers, stating that the statements contained therein are true, and the signers thereof signed the same in the presence of the affiant, or acknowledged their signatures thereto to him or her.
(c) The provisions of this section are cumulative and shall not be construed to repeal or supersede any laws not directly inconsistent herewith.
(Acts 1980, No. 80-462, p. 722; §10-1-3; amended and renumbered by Act 2009-513, p. 967, §346; Act 2020-73, §10.)
Whenever 10 or more retail merchants wish to form an association, cooperative society, or corporation for nonprofit purposes in the sense of not paying interest or dividends on stock, but for mutual benefit through the application of cooperation or other economic principles, they may become a body corporate in the manner provided in Chapter 4.
(Acts 1915, No. 412, p. 368; Code 1923, §7162; Code 1940, T. 10, §151; Acts 1984, No. 84-290, p. 502, §93; §10-4-260; amended and renumbered by Act 2009-513, p. 967, §348.)
Whenever 10 or more wholesale merchants wish to form an association, cooperative society, or corporation for nonprofit purposes in the sense of not paying interest or dividends on stock, but for mutual benefit through the application of cooperation or other economic principles, they may become a body corporate in the manner provided in Chapter 4.
(Acts 1951, No. 288, p. 572, §1; Acts 1984, No. 84-290, p. 502, §93; §10-4-280; amended and renumbered by Act 2009-513, p. 967, §350.)
All corporations organized under the general laws of this state, or heretofore under a special act of the Legislature, and all corporations organized under the laws of any other of the United States which have complied with the Constitution and laws of the State of Alabama as to foreign corporations and which by their charter have the right to manufacture, supply, and sell to the public power produced by water as a motive force, shall, after acquiring by purchase, or otherwise than by condemnation, a dam site or power site comprising not less than one acre of land upon each and opposite sides of any watercourse or after acquiring by purchase, or otherwise than by condemnation, a dam site comprising not less than one acre of land upon one side of any watercourse and, where the dam site on the other side of the watercourse is owned or controlled by the United States, shall have acquired the permission of the United States to attach to or use the lock, dam, or other property owned or controlled by the United States for an abutment site on the other side of the watercourse, in addition to other powers conferred by law, have the following rights, powers, and authority:
(1) To acquire by condemnation the lands and rights necessary for the construction and operation of the dam and works connected therewith or useful thereto, either up or downstream therefrom, and in case of non-navigable streams, to construct and operate at the site, or other point up or down the stream therefrom, and across the stream, a dam, together with all works incident, necessary, or related thereto, in connection therewith, to impound or divert water of any watercourse, or watercourses, of this state, to raise higher such dam and enlarge the works necessary, related, or incident thereto and to construct other works necessary, incident, or related thereto, either upstream or downstream therefrom, as may be required or deemed expedient by the corporation in the manufacture and supply of power produced by water as a motive force.
(2) To acquire by condemnation all lands, waters, interests, rights, or easements in lands or waters likely to be flooded or damaged by impounding or diverting the water of any watercourse in this state or its tributaries, or necessary for the construction or operation of dams or power houses, or works necessary, incident or related thereto, or likely or liable to be flooded or damaged by the construction, operation, or enlargement of the dams, or works incident, necessary, or related thereto, or damaged or taken in the construction, operation, or use of canals, tailraces, or exit ways necessary, useful, or convenient for the escape, conveyance, or return of the water used in the operation of the works or power plant.
(3) To acquire by condemnation the necessary lands for substations and transmission lines, but shall have no right to condemn a private residence nor the outhouse, garden, or orchard within the curtilage of a private residence, for a substation site or for rights-of-way for its transmission line or lines. The corporation shall have no right to condemn lands, water, or water rights in use for power purposes by another corporation upon the same watercourse, having similar powers and essential to its operations, or lands, water, or water rights held by such other corporation for power purposes where the lands, water, or rights in themselves and taken alone or in connection with other lands, water, or rights owned by the other corporation can be made the reasonable basis of a water power development of at least 1,000 continuous horsepower; but may condemn lands, hydraulic structures, water, or water rights held by the other corporation at any point upon the same watercourse, unless the lands, structures, or rights in themselves, taken alone or in connection with other lands or rights owned by the other corporation, can be made the reasonable basis of a water power development of at least 500 continuous horsepower; and may condemn lands, hydraulic structures, water, or water rights of the other corporation, at any point upon the same watercourse, in excess of the other corporation’s actual facilities for using the same, independently of the actual or proposed works of the condemning party, for the manufacture of power by its plant as the same is already established at the time the condemnation proceeding is begun; provided, the plant of the other corporation has been in operation for five years or more preceding the commencement of the condemnation proceedings. Nor shall the corporation have the right to condemn the lands, hydraulic structures, water, or water rights of any cotton factory, at any point upon the same watercourse, in actual and prior use by it for the operation of its plant; but may condemn the lands, hydraulic structures, water, or water rights of the cotton factory in excess of what is actually in use, or may be used, at normal stages of the stream for the operation of its plant as already established at the time the condemnation proceeding is commenced. The corporation may by condemnation acquire the right to flood grist mills and industries in conjunction therewith, together with lands and water rights appertaining thereto. In all cases just compensation shall first be paid to the owner in the manner provided by law for all property taken.
(4) To acquire by condemnation the right to flood public and private ferries and the approaches thereto, but the corporation in the event of acquiring the property by condemnation, shall relocate and place public ferries and the approaches thereto in a condition satisfactory to the county commissions of the counties in which the public ferries are located.
(5) To acquire by condemnation the right to flood private roads and shall have the right to flood public roads by paying to the county commissions of counties in which public roads are the cost of locating, laying out, and opening other public roads in lieu of and to the same extent as the public roads flooded or intended to be flooded; but the corporation may appeal from the order of the county commission to the circuit court of the county within 30 days after the making of the order, by filing with the judge of probate of the county a written notice of appeal, and on the appeal the trial shall be de novo. Upon the payment by the corporation to the county commission of the sum fixed by the commission, together with the costs of the proceeding pending the appeal, and upon the execution of a bond in double the amount of the damages or amount so fixed, with good and sufficient sureties to pay the damages as the county may sustain, the corporation shall be entitled to flood the roads which are made the object of the proceeding; but such right shall not vest absolutely in the corporation until the final determination of the case and the payment or deposit in court of the damages or compensation as shall be adjudged.
(6) To acquire by condemnation ways and rights-of-way not exceeding a width of 100 feet for the total length of such rights-of-way upon which to erect tower, pole, or wire lines for the manufacture, supply, and sale of power produced by water as a motive force; but the corporation shall have no right without consent to construct and operate tower, pole, and wire lines upon the right-of-way of any steam or electric railroad, telegraph, or telephone company, except to cross the same, and the corporation shall have no right without consent to construct and operate tower, pole, and wire lines upon the right-of-way of another corporation having the power to manufacture, supply, and sell power, produced by water as a motive force, except to cross the same.
(7) To erect and operate tower, pole, and wire lines across, along and on public roads, subject to the regulation of the county commissions of the counties in which the roads are located.
(8) To acquire by condemnation ways and rights-of-way, not exceeding a width of 100 feet, for the total length of the rights-of-way for the purpose of constructing earth, steam, and electric roads for the transportation of material, equipment, and supplies required or useful in the construction, operation, and maintenance of the dam and works incidental and necessary thereto.
(9) To clear and remove from rights-of-way and from lands likely and liable to be flooded all timber and other growth, and the right and authority to remove outside of the rights-of-way such timber as may injure or endanger by shading, falling, or otherwise any of its works and for that purpose may acquire the timber by condemnation.
(10) Such corporations and public utility corporations shall have and exercise all the rights, powers, and privileges now and hereafter conferred upon public utility corporations.
(Code 1907, §§3627-3633, 3635; Acts 1923, No. 92, p. 79; Code 1923, §§7193-7199, 7201; Code 1940, T. 10, §§178-184, 186; §10-4-320; amended and renumbered by Act 2009-513, p. 967, §352.)
Any corporation which exercises any of the rights conferred by this article shall, after the completion of its works and plants, be under the duty and obligation to the public to manufacture and sell to the public electric current produced at its plants; and any corporation manufacturing, selling, and supplying power, heat, light, or electricity produced by water as a motive force under this article must sell such power, heat, light, or electricity to any person or persons, municipal or other corporations, in order in which requests or demands are made for such light, heat, power, or electricity; provided, that nothing in this section shall be construed to require any corporation to furnish light, heat, power, or electricity to any person or corporation, until satisfied of the financial responsibility of the person or corporation, except in conformity with its reasonable rules and regulations and reasonable prices for the same and except as far as the capacity of its plant will permit.
(Code 1907, §3636; Code 1923, §7202; Code 1940, T. 10, §187; §10-4-321; amended and renumbered by Act 2009-513, p. 967, §352.)
The procedure for condemnation under this article shall be in the manner provided for the condemnation of lands and rights-of-way for public use in Chapter 1A of Title 18; or, at the option of the condemning party, in the manner provided in any other statute conferring the power of eminent domain on public utility corporations.
(Code 1907, §3637; Code 1923, §7203; Acts 1927, No. 610, p. 708; Code 1940, T. 10, §188; §10-4-322; amended and renumbered by Act 2009-513, p. 967, §352.)
Any dam erected in accordance with this article shall be considered a dam authorized by the Legislature of this state at the particular site selected and of the specific height and dimensions determined upon.
(Code 1907, §3634; Code 1923, §7200; Code 1940, T. 10, §185; §10-4-323; amended and renumbered by Act 2009-513, p. 967, §352.)
The Legislature finds and declares that the services of nonprofit corporations, organizations, associations, boards, authorities, and commissions are critical to the efficient conduct and management of the public, civic, and charitable affairs of the citizens of this state. Noncompensated officers, directors, trustees, partners, managers, members, and governing persons and other members of governing authorities of such nonprofit entities must be permitted to operate without undue concern for the possibility of litigation arising from the discharge of their duties as policymakers.
(Acts 1987, No. 87-706, p. 1242, §1; §10-11-1; amended and renumbered by Act 2009-513, p. 967, §354; Act 2020-73, §10.)
The following terms shall have the following respective meanings for the purposes of this chapter:
(1) OFFICER. Any officer, director, trustee, partner, manager, member, and governing person and other member of the governing authority of a qualified entity who does not receive compensation for serving in such capacity. A per diem amount of not more than three hundred dollars ($300) per day and actual, reasonable, and necessary expenses shall not constitute compensation for the purposes of this article. Provided, however, that the immunity granted herein shall not extend to officers, directors, trustees, partners, managers, or members of any board, authority, or commission dealing with pari-mutuel betting, gambling, or games of chance.
(2) QUALIFIED ENTITY.
a. Any nonprofit corporation, association, or organization which is exempt from federal income taxation under Section 501(c) of the Internal Revenue Code of 1986, as amended;
b. Any nonprofit corporation, association, or organization which is organized pursuant to Section 10A-4-1.01, et seq.;
c. Any organization organized under Sections 22-51-1, 22-51-2, 22-51-3, 22-51-4, 22-51-5, 22-51-6, 22-51-7, 22-51-8, 22-51-9, 22-51-10, 22-51-11, 22-51-12, 22-51-13, and 22-51-14;
d. Any self-insured fund established pursuant to Section 11-26-1, 11-26-2, 11-30-2, or 25-5-9, provided, however, this chapter shall not apply to any self-insured employer operating under Section 25-5-8; and
e. Any board, authority, or commission the members of which are appointed by the governing body or bodies of any county or municipality, or by the Governor or other constitutional officer or member of the Legislature pursuant to legislative or constitutional authorization, or the members of which are constitutionally or legislatively delegated.
(Acts 1987, No. 87-706, p. 1242, §2; §10-11-2; amended and renumbered by Act 2009-513, p. 967, §354; Act 2020-73, §10.)
Any noncompensated officer of a qualified entity shall be immune from suit and not subject to civil liability arising from the conduct of the affairs of the qualified entity except when the act or omission of the officer, which gives rise to a cause of action, amounts to willful or wanton misconduct or fraud, or gross negligence. Provided however, such immunity shall not, except to the extent as may otherwise be provided by law, extend to the qualified entity, to a for-profit subsidiary of the qualified entity, or to the officers of such for-profit subsidiary but only to the qualified entity’s officers as defined in this article. Nothing contained herein shall be construed to immunize the corporate entity or qualified entity for the acts or omissions of noncompensated officers as defined in this article.
(Acts 1987, No. 87-706, p. 1242, §3; §10-11-3; amended and renumbered by Act 2009-513, p. 967, §354.)
Nothing in this article shall be construed to affect any civil action brought by any qualified entity against any officer of such qualified entity or to create any liability that did not exist prior to the article’s passage or to diminish any immunity from suit or liability now enjoyed by a qualified entity or any officer thereof. The provisions of this article shall not apply to any claim, cause of action, action, or suit brought against an officer for any personal injury to or death of another person or property damage arising out of an accident inflicted by that officer while acting within the line and scope of the officer’s duties.
(Acts 1987, No. 87-706, p. 1242, §4; §10-11-4; amended and renumbered by Act 2009-513, p. 967, §354.)
Nothing in this article shall be construed to affect any action brought under Title 41, Chapter 5.
(Acts 1987, No. 87-706, p. 1242, §5; §10-11-5; amended and renumbered by Act 2009-513, p. 967, §354.)
[Repealed]
Repealed by Act 2013-311, §3, effective August 1, 2013.
(Acts 1979, No. 79-705, p. 1253, §1; §10-1-2; amended and renumbered by Act 2009-513, p. 967, §356.)
[Repealed]
Repealed by Act 2013-311, §3, effective August 1, 2013.
(Acts 1959, No. 414, p. 1055, §64; Acts 1979, No. 79-705, p. 1253, §3; Code 1975, §10-2-168; Acts 1981, No. 81-868, p. 1661, §1; §10-2A-70; amended and renumbered by Act 2009-513, p. 967, §356.)
[Repealed]
Repealed by Act 2013-311, §3, effective August 1, 2013.
(Acts 1981, No. 81-543, p. 911, §§1, 3; Acts 1988, No. 88-107, p. 137, §1; §10-2A-70.01; amended and renumbered by Act 2009-513, p. 967, §356.)
[Repealed]
Repealed by Act 2013-311, §3, effective August 1, 2013.
(Acts 1981, No. 81-860, p. 1631, §3; Acts 1988, No. 88-107, p. 137, §2; §10-2A-70.02; amended and renumbered by Act 2009-513, p. 967, §356.)
Corporations formed for the purpose of constructing, operating, or maintaining railroads, street railroads, gas or electric works, water companies, power companies, canals, terminals, bridges, viaducts, wharves, piers, telegraph or telephone lines, pipelines, or any other work of internal improvement or public utility may exercise the power of eminent domain in the manner provided by law.
(Code 1907, §3482; Code 1923, §7016; Code 1940, T. 10, §71; Acts 1973, No. 1063, p. 1777, §1; §10-5-1; amended and renumbered by Act 2009-513, p. 967, §358.)
Railroad companies may, by condemnation, acquire real estate for ways and rights-of-way not exceeding 100 feet in width throughout the entire length of its lines, such other lands as may be necessary for ways and rights-of-way for switches, turnouts, sidetracks, extensions, and branch roads not exceeding 100 feet in width throughout the entire length of such switches, turnouts, sidetracks, extensions, and branch roads and such other lands as may be necessary in making heavy excavations or embankments, or for the purpose of wasting material from excavations, for borrowing earth or other material for the construction of embankments or for protecting, making, keeping safe, and perfecting its roadway, together with the rights to remove all such trees outside thereof as might by falling upon, or shading, the roadway, injure the same, and may relocate any portion of its line for purpose of straightening or otherwise improving the same and, for that purpose, may acquire by gift, purchase, or condemnation all necessary rights-of-way over lands and abandon its original or constructed line, but it shall not change its termini or make an entire departure from its original line between such termini.
(Code 1907, §3484; Acts 1909, No. 52, p. 62; Code 1923, §7018; Code 1940, T. 10, §73; §10-5-2; amended and renumbered by Act 2009-513, p. 967, §358.)
Any railroad is hereby authorized to transfer all rights, title, and interests to any abandoned right-of-way or portion thereof for public road and bridge use to the State Department of Transportation or for any purpose to any county commission in any county or any municipality in which the right-of-way or portion thereof is located.
(Acts 1985, 2nd Ex. Sess., No. 85-937; §10-5-2.1 amended and renumbered by Act 2009-513, p. 967, §358.)
(a) Every mining, manufacturing, industrial, power, and quarrying corporation or company may acquire by condemnation rights-of-way or easements over or across the lands or easements of others for ways and rights-of-way on or under which it may erect or construct and operate railways, tramways, pipelines, transmission lines, cables, ways, roads, and underground passages not exceeding 100 feet in width for the purpose of connecting any part of its lands, works, plants, mines, lines, or system with any other part thereof, with any public road, railroad, navigable water, with the mines, lands, works, plants, lines, or system of any other such company, corporation, or owner or with any shipping, storage, delivery, receiving, or distributing point and for the purpose of transporting or transmitting any materials, equipment, or products used by or mined, manufactured, produced, acquired, received, sold, delivered, or distributed, or subject to contract for distribution by such corporation or company, and to cut and fell trees on or so near such right-of-way as might, by falling or otherwise, injure or endanger any of the works, lines, machinery, plant, or equipment placed thereon.
(b) The company may acquire by condemnation lands on the bank of or adjoining any navigable waters not exceeding in area 10 acres on which it may erect or construct, maintain, and operate power plants, private or public warehouses, depots, storage plants, tipples, loading and unloading places, hoist and hoist houses, wharves, piers, and landings to be used in connection with its operations or otherwise, and only a reasonable toll or charge, to be approved by the Public Service Commission of Alabama, shall be made for public use thereof.
(c) The right to condemn given in this section shall not include the right to condemn any private residence, nor the outhouses, garden, or orchard within the curtilage of any private residence.
(d) The acquisition of rights-of-way for mining, manufacturing, industrial power, and quarrying purposes as provided in this section is hereby declared to be a public use and necessary to the development of the state. No proceeding for condemnation of rights-of-way for transmission lines, cables, or pipelines authorized in this section shall be instituted until the Alabama Public Service Commission shall have issued a certificate on application, after a public notice not exceeding 30 days as the commission shall prescribe, to the effect that in the opinion of the commission the proposed use would be in furtherance of industrial development by the company or corporation or its privies in this state, the duty and authority being hereby conferred on the commission to hear and set up the application.
(e) Every corporation acquiring a right-of-way by purchase or condemnation for any purpose contemplated in this section shall have the right, where necessary, to cross public roads and lands, and all navigable rivers and streams where necessary for any such use, subject to such reasonable conditions as to the exercise of the right as may be prescribed by any public authority having jurisdiction over same; provided further, that nothing contained in this section shall be held or construed as relieving or exempting any person, firm, or corporation, in fact, engaging in or operating a business as a public utility and otherwise subject to regulation by laws now existing or hereafter enacted, from full subjection to and compliance with all laws or from liability for any fees, licenses, or taxes payable in respect of such utility business.
(Code 1907, §3485; Acts 1915, No. 698, p. 770; Code 1923, §7019; Acts 1932, Ex. Sess., No. 31, p. 24; Code 1940, T. 10, §74; §10-5-3 amended and renumbered by Act 2009-513, p. 967, §358.)
Street railroad companies, telegraph, telephone, water, gas, electric, power, canal, pipeline companies, and all other companies formed for constructing, operating, or maintaining any work of internal improvement or public utility may acquire by condemnation for a right-of-way for their railways, lines, tunnels, canals, dams, pipelines, excavations, or works, lands for ways and rights-of-way not exceeding 100 feet in width throughout the entire length of such railways, lines, tunnels, canals, dams, pipelines, excavations, or works, together with the right to cut down such trees as might, by falling, injure the same, together with the necessary lands, other than lands for ways and rights-of-way, for the construction or installation of facilities, apparatus, or equipment necessary for the operation of such railways, lines, tunnels, canals, dams, pipelines, excavations, or works.
(Code 1907, §3486; Code 1923, §7020; Code 1940, T. 10, §75; Acts 1973, No. 1063, p. 1777, §2; §10-5-4 amended and renumbered by Act 2009-513, p. 967, §358.)
Unless otherwise provided by law, no street railroad company or any other corporation, except railroad companies, pipeline companies, and public works companies shall, without the consent of the owner, construct any railway, tramway, canal, tunnel, underground passage, telegraph or telephone line, aqueduct, pipeline, or any other line or works through any yard or curtilage of a dwelling house, garden, stable lot, or barn.
(Code 1907, §3487; Acts 1909, No. 13, p. 19; Code 1923, §7021; Code 1940, T. 10, §76; Acts 1973, No. 1063, p. 1777, §3; §10-5-5 amended and renumbered by Act 2009-513, p. 967, §358.)
(a) Corporations authorized to construct and operate waterworks for the supplying of municipalities and their inhabitants, or others living or doing business in the vicinity of them, with water shall have the power, in order to obtain a supply of water for their storage ponds, reservoirs, pipes, and canals, to take over and use, after condemning the same, water of any river, stream, spring, or other water source which may be necessary for them to use for that purpose. They may also acquire by condemnation riparian rights and all lands adjacent to such streams or water sources as shall be necessary to protect and preserve the purity of such supply; and they shall also have the power to condemn rights-of-way and sites of any necessary area for pipelines, ditches, canals, dams, storage ponds, reservoirs, and other necessary purposes for the operation of their waterworks and the collection and distribution of the water supply. For this purpose, the companies may institute ad quod damnum proceedings against the riparian landowners or owner along such river or stream or of other sources, or the owner of any lands, wherever located, desired to be used for any of the purposes above mentioned, in the probate court of the county in which the land on or over which the easements sought to be condemned are situated in accordance with the general laws of this state providing for the condemnation of lands for public purposes.
(b) The power of condemnation given in this section shall include the right to condemn, wherever necessary for any of the purposes hereinbefore mentioned, any yard or curtilage of a dwelling house, garden, stable, lot, or barn, or so much thereof as may be necessary.
(c) Whenever the ownership of the mineral interest in lands has been severed from the ownership of the surface and the mining of the minerals would endanger any proposed canal, storage pond, or reservoir, a water company may institute ad quod damnum proceedings against the owner, or owners, of the minerals situated under the proposed canals, reservoir or storage ponds in the probate court of the county in which the lands are situated in accordance with the general laws of the state, condemning the mineral interests or so much thereof as may be required for the support of the surface where the canal, reservoir, or storage pond is to be located.
(d) In proceedings to condemn under this section, any number of, or all, the riparian proprietors or other owners along the river, stream, or other water source in the same county may be joined in one proceeding or be proceeded against separately.
(e) No right-of-way shall be granted over the streets, avenues, alleys, or public grounds of any municipal corporation without first obtaining the consent of the municipal authorities thereto.
(f) No corporation shall have the right to condemn the water of any stream, spring, or other water source which is the property of another water company supplying with water a municipal corporation or the inhabitants thereof.
(Code 1907, §§3488-3491; Acts 1909, No. 59, p. 60; Code 1923, §§7022-7025; Code 1940, T. 10, §§77-80; §10-5-6 amended and renumbered by Act 2009-513, p. 967, §358.)
Railroads or railroad companies operating in this state may acquire by condemnation proceedings, in the mode prescribed by law, lands for depots, freight yards, and team tracks; but no condemnation proceeding shall be begun for either of those purposes until an application for permission to bring the condemnation proceeding has first been submitted to, and the same approved by, the Public Service Commission of Alabama. Should the lands not be used for the purposes of condemnation within one year from the date of their condemnation or should the lands be abandoned for the use condemned or be used for purposes not authorized by the condemnation, the same shall revert to the owner or owners or his, her, or their heirs.
(Code 1907, §3492; Code 1923, §7026; Code 1940, T. 10, §81; §10-5-7 amended and renumbered by Act 2009-513, p. 967, §358.)
Railroads, street railroads, mining, manufacturing, power, quarrying, telegraph, telephone, pipeline, and other corporations having rights and powers to condemn:
(1) May cause such examinations and surveys for their proposed railroads, pipelines, lines, facilities, apparatus, or equipment as may be necessary to the selection of the most advantageous routes and sites; and for such purpose, may, by their officers, agents, and servants, enter upon the lands and waters of any person, subject to liability for all damages done thereto;
(2) May, in the construction of their lines or sites, cross navigable streams, but must not impede the navigation thereof;
(3) May use, cross, or change public roads, when necessary, in the construction of their railways, switches, branches, lines, pipelines, facilities, apparatus, equipment, or buildings, but must place the public road so crossed, used, or changed in condition satisfactory to the county authorities having the control thereof and, where practicable, the railroads must go over, or under, the public roadway or railroad track; and
(4) May cross or intersect with any other railroad or street railway and, if the crossing or intersection cannot be made by contract or agreement, may acquire the rights thereto by condemnation in the mode provided by law.
(Code 1907, §3493; Code 1923, §7027; Code 1940, T. 10, §82; Acts 1973, No. 1063, p. 1777, §4; §10-5-8 amended and renumbered by Act 2009-513, p. 967, §358.)
Railroad companies and mining, manufacturing, and quarrying companies may contract, purchase, or otherwise acquire, own, operate, and maintain steamboats, barges, ships, and other vessels for transportation of freight and passengers on the navigable waters of this state, any other state or foreign country and on the seas. Railroad companies may purchase or otherwise acquire, own, maintain, and operate motor vehicles for the transportation of persons or property, or both, upon the highways of this state; they may purchase or otherwise acquire, own, maintain, and operate airplanes for the transportation of persons or property, or both, in the air; they may purchase, lease, or otherwise acquire and own the property, rights, and franchises of any individual, firm, partnership, or other association of persons, or corporation, engaged in the transportation of persons or property, or both, by motor vehicle on the highways or by airplanes in the air, and they may subscribe to, acquire, and own the capital stock of any such corporation and may enter into any agreement or arrangement, not inconsistent with law, with any individual, firm, partnership, or other association of persons, or corporation, engaged in, or authorized to engage in, any of the methods of transportation; provided, however, that any railroad companies exercising in this state the powers granted in this section shall, in their operation of motor vehicles, be subject to all the laws of this state applicable to or authorizing, regulating, and governing motor carriers and their business or prescribing the condition under which operators of motor vehicles may operate vehicles on the highways of this state. All railroad companies organized under the laws of other states, but authorized to do business in this state, may exercise in this state the powers hereinabove granted, subject, however, to the limitations hereinabove set forth; provided, that before operating any motor vehicles upon the highways of this state, railroad companies must procure a certificate of convenience and necessity covering the operations.
(Code 1907, §3494; Code 1923, §7028; Acts 1939, No. 646, p. 1019, §1; Code 1940, T. 10, §83; §10-5-9 amended and renumbered by Act 2009-513, p. 967, §358.)
Whenever all the capital stock of a railroad corporation formed under this title is owned by a railroad corporation chartered under the laws of this state or another state, the corporation may sell and convey to the corporation owning its stock all its franchises, rights, roadbed, and property; but the purchasing company, if a foreign corporation, shall keep an office in this state and an agent thereat, service of process upon the agent shall be service upon the purchasing company. The railroad so purchased shall be in all respects subject to the laws of this state as if owned by a domestic corporation, and all liens and rights of creditors shall be preserved unimpaired.
(Code 1907, §3495; Code 1923, §7029; Code 1940, T. 10, §84; §10-5-10 amended and renumbered by Act 2009-513, p. 967, §358.)
(a) Any railroad corporation and any mining, manufacturing, or quarrying corporation may, at any time, by means of subscription to the capital stock of any other corporation or company or otherwise, aid the corporation or company in the construction of its railroad for the purpose of forming a connection with the railroad or the principal place of business or works of the corporation furnishing the aid.
(b) Any corporation may purchase at judicial sale, or otherwise hold and use or lease any part or all of the railroad constructed by another corporation or company, together with its franchises, rights, and property, or may acquire, hold, and use all or any part of the capital stock of another corporation chartered under the laws of this state or any other state, if the railroad or railroads so purchased connect with, or will, when completed, connect with the railroad works, factory, or plant of the purchasing or leasing corporation, either directly or by means of an intervening line; or any two or more companies whose lines are or will be so connected may enter into any arrangement for their common benefit, consistent with and calculated to promote the objects for which they were created.
(c) No aid shall be furnished nor any purchase, lease, or arrangement perfected as mentioned in this section until a meeting of the stockholders of each of the corporations has been called by the directors thereof, at such time and place and in such manner as they shall designate, and the holders of the larger amount in value of the stock of each of the corporations represented, by voting at a meeting in person or by proxy, shall have assented thereto and copies of the proceedings of the meetings certified by the president, or other managing head of the corporations, under the corporate seal shall be filed in the office of the Secretary of State.
(Code 1907, §§3496-3498; Code 1923, §§7030-7032; Code 1940, T. 10, §§85-87; §10-5-11 amended and renumbered by Act 2009-513, p. 967, §358.)
Railroads, mining, manufacturing, and quarrying companies may purchase, lease, or acquire in any other manner, hold and operate a railroad or railroads or canals without this state for the purpose of making extensions or connections, and within this state may extend their roads or may construct and operate branch roads from any point or points on their lines and may also construct and operate second tracks, roads, or branch roads connecting any two points on their lines. The purchase must be made by resolution of the board of directors, which must be submitted to a meeting of the stockholders, called for the purpose of its consideration; at the meeting the resolution must be approved by the vote of holders of the larger amount in value of the stock, and if the resolution is so approved, a copy thereof and of the proceedings of the meeting of the stockholders, certified by the president and the secretary under the corporate seal, must be filed and recorded in the office of the Secretary of State. The extension or construction of the branch and second tracks or roads must be made by resolution of the board of directors, to be entered in the record of the proceedings of the corporation, designating the point from which and the point to which the extension or second tracks or roads, or branch roads, are to be constructed. A copy of the resolution, certified by the president and secretary under the corporate seal, must be filed in the office of the Secretary of State; and thereafter, for the purpose of making the extension or building the branch and second tracks or roads, the corporation shall have all the rights, powers, and immunities which are now or may hereafter, by the laws of this state, be granted to and vested in railroad corporations under and by virtue of the general corporation laws of this state.
(Code 1907, §3499; Acts 1911, No. 324, p. 576; Code 1923, §7033; Code 1940, T. 10, §88; §10-5-12 amended and renumbered by Act 2009-513, p. 967, §358.)
Mining, manufacturing, and quarrying corporations may construct and operate to, and from, their mines, furnaces, mills, factories, quarries, or other works, railways, tramways, canals, tunnels, underground passages, or roads whereby connections may be made to, and from, their principal places of business, mines, furnaces, mills, quarries, or other works and any public highways, turnpike, macadamized, plank, or other graded road, railroad, or navigable waters, or to or with their mines, ore beds, coking, or cooling grounds, timberlands, canals, or aqueducts to or from their mills, factories, furnaces, quarries, other works, or any water or watercourses, and may transport as common carriers freight and passengers on any railroad, other roads, canals, or aqueducts constructed or purchased by them, taking reasonable compensation therefor.
(Code 1907, §3500; Code 1923, §7034; Code 1940, T. 10, §89; §10-5-13 amended and renumbered by Act 2009-513, p. 967, §358.)
Street railway, gas, electric, and water companies and all other corporations, except railroads, formed for the purpose of constructing, operating, or maintaining any works of internal improvement or public utility in any county or municipal corporation may contract with the authorities of the county or municipal corporation in reference to the use of the streets, public roads, and other public places therein the manner of constructing and operating their lines or works, the public service they are to render, and the compensation they are to receive for the carriage of persons and property, for water, gas, electric light and power, or for any other commodity to be supplied or service rendered to the county or municipal corporation and the inhabitants thereof, which contract may be altered by mutual consent; but nothing in this section shall prevent any cities or towns from regulating, from time to time, the use of the streets and public places or requiring a change in the construction of the lines and works of the corporations, if necessary, whenever the public good or convenience requires.
(Code 1907, §3501; Code 1923, §7035; Code 1940, T. 10, §90; §10-5-14; amended and renumbered by Act 2009-513, p. 967, §358.)
When an indictment is returned against a corporation doing business in this state, such indictment shall be forthwith docketed, and the clerk of the court shall issue a notice thereof to the defendant corporation, accompanied by a certified copy of the indictment.
(Code 1896, §5316; Code 1907, §6624; Code 1923, §3727; Code 1940, T. 10, §199; §10-7-1; amended and renumbered by Act 2009-513, p. 967, §360.)
Such notice and copy may be served upon any officer or agent of the defendant corporation authorized by law to receive service of summons or other civil process issuing against such corporation, and upon the return of the sheriff showing proper service, the indictment stands for trial.
(Code 1896, §5317; Code 1907, §6625; Code 1923, §3728; Code 1940, T. 10, §200; §10-7-2; amended and renumbered by Act 2009-513, p. 967, §360.)
If the defendant corporation fails to appear and plead to the indictment, the court must cause the plea of not guilty to be entered for it, and the trial shall proceed as if the corporation had appeared and pleaded not guilty; but, in such case, proof must be made to the court that the person upon whom the notice and copy of the indictment were served was an officer or agent of the corporation authorized by law to receive such service.
(Code 1896, §5318; Code 1907, §6626; Code 1923, §3729; Code 1940, T. 10, §201; §10-7-3; amended and renumbered by Act 2009-513, p. 967, §360.)
Upon the conviction of such corporation, judgment shall be entered against it for the fine imposed, together with the costs of the prosecution, and execution thereon shall forthwith issue against the property of the corporation; and other executions may issue thereon until the judgment is satisfied. But in case of appeal from such judgment, the execution thereof may be stayed as in civil cases.
(Code 1896, §5319; Code 1907, §6627; Code 1923, §3730; Code 1940, T. 10, §202; §10-7-4; amended and renumbered by Act 2009-513, p. 967, §360.)
For the purposes of this article, the following terms shall have the meanings respectively ascribed to them by this section:
(1) PROFESSIONAL ASSOCIATION. An unincorporated association organized under this article for the purpose of rendering professional service.
(2) PROFESSIONAL SERVICE. Any type of professional service which may be legally performed only pursuant to a license issued by a state court, state regulatory licensing board, or other like agency pursuant to state laws.
(Acts 1961, No. 865, p. 1349, §1; §10-10-1; amended and renumbered by Act 2009-513, p. 967, §370.)
(a) Professional associations organized pursuant to this article shall be governed generally by all laws governing or applicable to corporations, where applicable, and not in conflict herewith. No such association shall be held or deemed to be a partnership, nor shall such association be governed by laws relating to partnerships.
(b) This chapter shall apply only to professional associations organized hereunder before January 1, 1984.
(Acts 1961, No. 865, p. 1349, §16; Acts 1983, No. 83-514, §30; §10-10-2; amended and renumbered by Act 2009-513, p. 967, §370.)
Actions by and against a professional association organized pursuant to this article shall be governed by Article 7 of Chapter 7 of Title 6.
(Acts 1961, No. 865, p. 1349, §15; §10-10-3; amended and renumbered by Act 2009-513, p. 967, §370.)
Prior to January 1, 1984, one or more persons duly licensed to practice a profession under the laws of this state may form a professional association, as distinguished from a partnership or corporation, for the purpose of carrying on a profession upon compliance with the terms of this article; provided, that no professional association organized pursuant to the provisions of this article shall render professional service in more than one type of professional service.
(Acts 1961, No. 865, p. 1349, §2; Acts 1971, No. 184, p. 479; §10-10-4; amended and renumbered by Act 2009-513, p. 967, §370.)
Prior to January 1, 1984, person or persons may form a professional association by executing and recording the certificate of formation in the office of the judge of probate of the county in which the principal office of the association is located, and must be by the judge recorded in a book kept for that purpose. After recording the certificate of formation, the judge of probate shall endorse thereon a certificate of registration, showing the book and page where recorded, and for services for recording the certificate shall receive fifteen cents ($.15) for each 100 words of the certificate of formation and two dollars fifty cents ($2.50) for examining the certificate of formation.
The person or persons forming the association shall adopt such name for the association as they in their discretion may determine, provided that the name selected shall be followed by the words “Professional Association” or the abbreviation “P.A.” Any dentist or dentists forming the association shall be governed by the rules of the regulating board of their profession in adopting a name for the association.
The certificate of formation may contain any provisions not in violation of law or the public policy of this state as the members of the association may decide.
The certificate of formation may be amended or dissolved at any time and from time to time by agreement of two thirds of the members at any regular meeting or at a special meeting called for that purpose, upon likewise recording an amendment or instrument of dissolution in the same place or places as the original certificate of formation.
(Acts 1961, No. 865, p. 1349, §3; Acts 1971, No. 184, p. 479; §10-10-5; amended and renumbered by Act 2009-513, p. 967, §370.)
A professional association may be organized only for the purpose of rendering one specific kind of professional service and shall not engage in any business other than rendering the professional service for which it was organized. However, it may invest its funds in real estate, mortgages, stocks, bonds, or any other type of investment and may own real or personal property necessary or appropriate for rendering professional service.
(Acts 1961, No. 865, p. 1349, §4; §10-10-6; amended and renumbered by Act 2009-513, p. 967, §370.)
A professional association organized pursuant to this article may issue stock or certificates of evidence of ownership of an interest in the assets of the professional association to the members of a stock-type association, or the association may be a nonstock organization with the members owning no individual interest in the assets of the association but with the rights and duties specified in the certificate of formation, or the association may be a nonstock organization with the members owning undivided interests in the assets of the association according to the certificate of formation. The stock or certificates of ownership, if a stock-type association, or a membership in a nonstock association, shall be freely transferable, except as may be lawfully restricted in the certificate of formation. A professional association may issue its capital stock to, if it is a stock-type association, or accept as members of the professional association, if a nonstock association, only persons who are duly licensed or otherwise legally authorized to render the same professional service as that for which the professional association was organized. Subject to the provisions of the certificate of formation, the estate of a member or shareholder who was a person duly licensed or otherwise legally authorized to render the same professional service as that for which the professional association was organized may continue to hold stock or membership pursuant to the certificate of formation for a reasonable period of administration of the estate, but shall not be authorized to participate in any decisions concerning the rendering of professional service.
(Acts 1961, No. 865, p. 1349, §9; §10-10-7; amended and renumbered by Act 2009-513, p. 967, §370.)
A professional association organized pursuant to this article shall be governed by a board of governors elected by the members or shareholders and represented by officers elected by the board of governors, so that centralization of management will be assured, and no member shall have the power to bind the association within the scope of the association’s business or profession merely by virtue of being a member or shareholder of the association. Members of the board of governors need not be members or shareholders of the professional association and officers need not be members of the board of governors; except, that the president shall be a member of the board of governors; provided, that no officer or member of the board of governors who is not duly licensed to practice the profession for which the professional association was organized shall participate in any decisions constituting the practice of the profession. The members may adopt bylaws as they may deem proper, or the power to promulgate bylaws of the association may be delegated by the certificate of formation to the board of governors of the professional association, as the members or shareholders may decide. Each member or shareholder shall have the power to cast a vote or votes at the meeting of the members or shareholders as the certificate of formation shall provide. The officers of the professional association may employ agents or employees of the association as they may deem advisable subject to Section 10A-30-1.12. The officers of the association shall include a president, vice-president, secretary, treasurer, and other officers as the board of governors may determine. Any one person may serve in more than one office; provided, that the president and the secretary of the professional association shall not be the same person.
(Acts 1961, No. 865, p. 1349, §7; §10-10-8; amended and renumbered by Act 2009-513, p. 967, §370.)
A professional association organized pursuant to the provisions of this article may contract in its own name, take, hold, and sell real and personal property in its own name, independent of its members, and sue and be sued as independent entities as now provided by law. Any conveyance in the name of the professional association to a third person executed by the president and attested by the secretary shall be conclusively presumed to be properly executed and shall divest all right, title, and interest of the professional association, its members, and the board of governors thereof. The assets of a professional association shall not be liable to attachment for the individual debts of its members or shareholders.
(Acts 1961, No. 865, p. 1349, §14; §10-10-9; amended and renumbered by Act 2009-513, p. 967, §370.)
A professional association shall, within 30 days after the organization of the professional association pursuant to this article and within 30 days after November 1 of each year thereafter, furnish a statement to the Secretary of State showing the names and post office addresses of all members or shareholders in the professional association and shall certify that all members or shareholders are duly licensed or otherwise legally authorized to render professional service in this state. This report shall be made on such forms and shall be prescribed and furnished upon request by the Secretary of State, shall be signed by the president or vice-president of the professional association and acknowledged and sworn to before a notary public by the person signing the report and shall be filed in the office of the Secretary of State. Upon the failure or refusal of any professional association to make the return or report to the Secretary of State, the professional association shall be liable for a penalty of fifty dollars ($50), and the Secretary of State is authorized to issue his or her execution therefor, including all costs incurred.
(Acts 1961, No. 865, p. 1349, §12; Acts 1989, Ex. Sess., No. 89-1005, p. 49, §1; §10-10-10; amended and renumbered by Act 2009-513, p. 967, §370.)
This article does not modify any law applicable to the relationship between a person furnishing professional services and a person receiving the service, including liability for tort arising out of such professional service and including the confidential relationship between the person rendering the professional service and the person receiving such professional service, if any; and all confidential relationships previously enjoyed under the laws of this state or hereinafter enacted shall remain inviolate. Subject to the foregoing provisions of this section, the members or shareholders of any professional association organized pursuant to this article shall not be individually liable for the debts of, or claims against, the professional association unless such member or shareholder has personally participated in the transaction for which the debt or claim is made or out of which it arises.
(Acts 1961, No. 865, p. 1349, §6; §10-10-11; amended and renumbered by Act 2009-513, p. 967, §370.)
A professional association may render professional services only through officers, employees, and agents who are themselves duly licensed or otherwise legally authorized to render professional service within this state. The term “employee,” as used in this section, does not include clerks, bookkeepers, technicians, nurses, or other individuals who are not usually or ordinarily considered by custom and practice to be rendering professional services for which a license or other legal authorization is required in connection with the profession practiced by a particular professional association, nor does the term “employee” include any other person who performs all his or her employment under the direct supervision and control of an officer, agent, or employee who is himself or herself rendering professional service to the public on behalf of the professional association; provided, that no person shall under the guise of employment practice a profession unless duly licensed to practice that profession under the laws of this state.
(Acts 1961, No. 865, p. 1349, §5; §10-10-12; amended and renumbered by Act 2009-513, p. 967, §370.)
If any member, shareholder, agent, or employee of a professional association becomes legally disqualified to render a professional service within the state or accepts employment or is elected to a public office that, pursuant to existing law, is a restriction or limitation upon rendering of professional service, he or she shall sever all employment with, or financial interest in, such professional association forthwith. A professional association’s failure to comply or require compliance with this section shall be a ground for the forfeiture of its right to render professional service as a professional association pursuant to this article. When a professional association’s failure to comply with this section is brought to the attention of the Secretary of State, the Secretary of State shall certify that fact to the Attorney General for appropriate action to dissolve the professional association.
(Acts 1961, No. 865, p. 1349, §10; §10-10-13; amended and renumbered by Act 2009-513, p. 967, §370.)
If the governing documents of a professional association fail to fix a price at which a professional association or its members or shareholders may purchase the membership or shares of a deceased, retired, expelled, or disqualified member or shareholder and if the governing documents do not otherwise provide, then the price for such share or shares or membership shall be the book value of such share or shares or membership at the end of the month immediately preceding the death or disqualification of the member or shareholder. Book value shall be determined by an independent certified accountant employed for such purpose from the books and records of the professional association by the regular method of accounting employed by the professional association. The determination by the certified public accountant of book value shall be conclusive on the professional association and its members or shareholders.
(Acts 1961, No. 865, p. 1349, §11; §10-10-14; amended and renumbered by Act 2009-513, p. 967, §370.)
Unless the certificate of formation expressly provide otherwise, a professional association shall continue as a separate entity independent of its members or shareholders for all purposes for such period of time as provided in the certificate of formation or until dissolved by a vote of two thirds of the members, and shall continue notwithstanding the death, insanity, incompetency, conviction for felony, resignation, withdrawal, transfer of membership or ownership of shares, retirement, or expulsion of any one or more of the members or shareholders, the admission or transfer of membership or shares to any new member, members, shareholder, or shareholders or the happening of any other event which, under the law of this state and under like circumstances, would work a dissolution of the partnership, it being the aim and intention of this section that such professional association shall have continuity of life independent of the life or status of its members or shareholders.
(Acts 1961, No. 865, p. 1349, §8; Acts 1971, No. 184, p. 479; §10-10-15; amended and renumbered by Act 2009-513, p. 967, §370.)
In the event of dissolution of a stock-type professional association, the board of governors, as trustees of the property of such professional association, shall apply the assets first to the payment of debts of the association and, secondly, to the holders of the stock as provided in the certificate of formation. In the event of dissolution of a nonstock-type association, the assets shall be distributed, or sold, and the net proceeds distributed first to the payment of debts of the association and, secondly, to or among the members of the association, as the certificate of formation shall provide.
(Acts 1961, No. 865, p. 1349, §13; §10-10-16; amended and renumbered by Act 2009-513, p. 967, §370.)
(a) This article applies to all close corporations, as defined in Section 10A-30-2.02.
(b) All provisions of this article shall be applicable to all close corporations as defined in Section 10A-30-2.02 except insofar as this article otherwise provides.
(c) Neither election to become, nor operation as, a close corporation shall deprive any shareholder of such corporation of the limitation of liability provided under the Alabama Business Corporation Law.
(d) This chapter shall apply only to close corporations formed in accordance with Section 10A-30-2.03 before January 1, 1995, or electing to become a close corporation pursuant to Section 10A-30-2.04 before January 1, 1995, and which has not voluntarily terminated its status as a close corporation or otherwise ceased to be a close corporation to which the provisions of this article apply before January 1, 1995.
(Acts 1980, No. 80-633, p. 1094, §161; Acts 1994, No. 94-245, p. 457, §4; §10-2A-300; amended and renumbered by Act 2009-513, p. 967, §372; Act 2019-94, §2.)
(a) A close corporation is a corporation organized under former Chapter 2A of former Title 10 whose certificate of formation contains the provisions required by former Section 10-2A-91 or a successor statute, including Section 10A-2-2.02 and, in addition, provide that:
(1) The corporation is a close corporation authorized by this article;
(2) All of the issued shares of all classes shall be subject to one or more of the restrictions on transfer permitted by former Section 10-2A-41 or a successor statute, including Section 10A-2-6.27; and
(3) For purposes of determining the number of holders of record of the stock of a close corporation, stock which is held in joint or common tenancy or by the entireties shall be treated as held by one shareholder.
(b) The certificate of formation of a close corporation may set forth the qualifications of shareholders, either by specifying classes of persons who shall be entitled to be holders of record of shares of any class, or by specifying classes of persons who shall not be entitled to be holders of shares of any class or both.
(c) All of the corporation’s issued shares of all classes, exclusive of treasury shares, shall be held of record by not more than a specified number of persons, not exceeding 30.
(Acts 1980, No. 80-633, p. 1094, §162; §10-2A-301; amended and renumbered by Act 2009-513, p. 967, §372.)
A close corporation which was formed in accordance with former Sections 10-2A-90 through 10-2A-96 must have been authorized by the affirmative vote of all holders of and subscribers to shares of the corporation, and:
(1) The certificate of formation contains a heading stating the name of the corporation and that it is a close corporation; and
(2) The certificate of formation contains the provisions required by Section 10A-30-2.02; and
(3) Each certificate for shares conspicuously notes the fact that the corporation is a close corporation and make reference to the restriction on transfer of shares set forth in the certificate of formation.
(Acts 1980, No. 80-633, p. 1094, §163; §10-2A-302; amended and renumbered by Act 2009-513, p. 967, §372; Act 2019-94, §2.)
(a) A corporation may voluntarily terminate its status as a close corporation and cease to be subject to this article by amending its certificate of formation to delete therefrom the additional provisions required or permitted by Section 10A-30-2.02 to be stated in the certificate of formation of close corporations except such provisions as are permitted by the Alabama Business Corporation Law which the corporation chooses to retain. Any such amendment shall be adopted and shall become effective in accordance with the Alabama Business Corporation Law, except that it must be approved by a vote of the holders of record of at least one-third of the shares of each class of stock of the corporation which are outstanding.
(b) The certificate of formation of a close corporation may provide that on any amendment to terminate its status as a close corporation, a vote greater than one-third or a vote of all shares of any class shall be required; and if the certificate of incorporation contains such a provision, that provision shall not be amended, repealed, or modified by any vote less than that required to terminate the corporation’s status as a close corporation.
(Acts 1980, No. 80-633, p. 1094, §165; §10-2A-304; amended and renumbered by Act 2009-513, p. 967, §374; Act 2019-94, §2.)
(a) If shares of a close corporation are issued or transferred to any person who is not entitled under any provision of the certificate of formation permitted by Section 10A-30-2.02 to be a holder of record of shares of the corporation, and if the certificate for shares conspicuously notes the qualifications of the persons entitled to be holders of record thereof, such person is conclusively presumed to have notice of the fact of his or her ineligibility to be a shareholder.
(b) If a certificate for shares of any close corporation conspicuously notes the fact of a restriction on transfer of shares of the corporation and the restriction is one which is permitted by the Alabama Business Corporation Law, the transferee of the shares is conclusively presumed to have notice of the fact that he or she has acquired shares in violation of the restriction, if such acquisition violates the restriction.
(c) Whenever any person to whom shares of a close corporation have been issued or transferred has, or is conclusively presumed under this section to have notice either that he or she is a person not eligible to be a holder of shares of the corporation, or that the transfer of shares is in violation of a restriction on transfer of shares, the corporation may, at its option, refuse to register transfer of the shares into the name of the transferee in addition to any remedies which may be available under the Alabama Business Corporation Law.
(d) The provisions of subsection (c) shall not be applicable if the transfer of shares even though otherwise contrary to subsections (a) or (b), has been consented to by all the shareholders of the close corporation, or if the close corporation has amended its certificate of formation in accordance with Section 10A-30-2.04.
(e) The term “transfer,” as used in this section, is not limited to a transfer for value.
(f) The provisions of this section do not in any way impair any rights of a transferee regarding any right to rescind the transaction or to recover under any applicable warranty express or implied.
(Acts 1980, No. 80-633, p. 1094, §166; §10-2A-305; amended and renumbered by Act 2009-513, p. 967, §374; Act 2019-94, §2.)
If a restriction on transfer of shares of a close corporation is held not to be authorized by the Alabama Business Corporation Law, the corporation shall nevertheless have an option for a period of 30 days after the judgment setting aside the restriction becomes final, to acquire the restricted shares at a price which is agreed upon by the parties or if no agreement is reached as to price, then at the fair value as determined by the circuit court of the county in which the corporation has its registered office or any court in such place having jurisdiction. In order to determine fair value, the court may appoint an appraiser to receive evidence and report to the court his or her findings and recommendation as to fair value. The appraiser shall have such powers and shall proceed, so far as applicable, in the same manner as appraisers appointed under Article 13 of Chapter 2A.
(Acts 1980, No. 80-633, p. 1094, §167; §10-2A-306; amended and renumbered by Act 2009-513, p. 967, §374; Act 2019-94, §2.)
A written agreement among the shareholders of a close corporation holding a majority of the outstanding shares entitled to vote, whether solely among themselves or with a party not a shareholder, is not invalid, as between the parties to the agreement, on the ground that it so relates to the conduct of the business and affairs of the corporation as to restrict or interfere with the discretion or powers of the board of directors. The effect of any such agreement shall be to relieve the directors and impose upon the shareholders who are parties to the agreement the liability for managerial acts or omissions which is imposed on directors to the extent and so long as the discretion or powers of the board in its management of corporate affairs is controlled by such agreement.
(Acts 1980, No. 80-633, p. 1094, §168; §10-2A-307; amended and renumbered by Act 2009-513, p. 967, §374.)
The certificate of formation of a close corporation may provide that the business of the corporation shall be managed by the shareholders of the corporation rather than by a board of directors. So long as this provision continues in effect:
(1) No meeting of shareholders need be called to elect directors;
(2) Unless the context clearly requires otherwise, the shareholders of the corporation shall be deemed to be directors for purposes of applying provisions of this article; and
(3) The shareholders of the corporation shall be subject to all liabilities of directors.
Such a provision may be inserted in the certificate of formation by amendment if all incorporators and subscribers or all holders of record of all of the outstanding shares, whether or not having voting power, authorize such a provision. An amendment to the certificate of formation to delete such a provision shall be adopted by a vote of the holders of record of not less than one-third of all outstanding shares of the corporation, whether or not otherwise entitled to vote. If the certificate of formation contains a provision authorized by this section, the existence of such provision shall be noted conspicuously on the face or back of every certificate for shares issued by such corporation.
(Acts 1980, No. 80-633, p. 1094, §169; §10-2A-308; amended and renumbered by Act 2009-513, p. 967, §374.)
(a) The circuit court of the county in which the corporation has its registered office or any court in such place having jurisdiction, upon application of any shareholder, may appoint one or more persons to be custodians, and, if the corporation is insolvent, to be receivers, of any close corporation when:
(1) Pursuant to Section 10A-30-2.08, the business and affairs of the corporation are managed by the shareholders and they are so divided that the business of the corporation is suffering or is threatened with irreparable injury and any remedy with respect to such deadlock provided in the governing documents or in any written agreement of the shareholders has failed; or
(2) The petitioning shareholder has the right to the dissolution of the corporation under a provision of the certificate of formation permitted by Section 10A-30-2.12.
(b) In lieu of appointing a custodian for a close corporation under this section, the court may appoint a provisional director, whose powers and status shall be as provided in Section 10A-30-2.10 if the court determines that it would be in the best interest of the corporation. The appointment shall not preclude any subsequent order of the court appointing a custodian for such corporation.
(c) A custodian appointed under this section shall have all the powers of a receiver or custodian appointed under the Alabama Business Corporation Law, but the authority of the custodian is to continue the business of the corporation and not to liquidate its affairs and distribute its assets, except when the court shall otherwise order.
(Acts 1980, No. 80-633, p. 1094, §170; §10-2A-309; amended and renumbered by Act 2009-513, p. 967, §374; Act 2019-94, §2.)
(a) Notwithstanding any contrary provision of the governing documents or agreement of the shareholders, the circuit court of the county in which the registered office of the corporation is located may appoint a provisional director for a close corporation if the directors are so divided respecting the management of the corporation’s business and affairs that the votes required for action by the board of directors cannot be obtained with the consequence that the business and affairs of the corporation can no longer be conducted to the advantage of the shareholders generally.
(b) An application for relief under this section must be filed (1) by at least one-half of the number of directors then in office, or (2) by the holders of at least one-third of all shares then entitled to elect directors, or, (3) if there be more than one class of shares then entitled to elect one or more directors, by the holders of two-thirds of the shares of any such class; but the certificate of formation of a close corporation may provide that a lesser proportion of the directors or of the shareholders or of a class of shareholders may apply for relief under this section.
(c) A provisional director shall be an impartial person who is neither a shareholder nor a creditor of the corporation or of any subsidiary or affiliate of the corporation, and whose further qualifications, if any, may be determined by the circuit court of the county. A provisional director is not a receiver of the corporation and does not have the title and powers of a custodian or receiver. A provisional director shall have all the rights and powers of a duly elected director of the corporation, including the right to notice of and to vote at meetings of directors until such time as he or she shall be removed by order of the circuit court of the county or by the holders of a majority of all shares then entitled to vote to elect directors or by the holders of two-thirds of the shares of that class of voting shares which filed the application for appointment of a provisional director. His or her compensation shall be determined by agreement between him or her and the corporation subject to approval of the circuit court of the county, which may fix his or her compensation in the absence of agreement or in the event of disagreement between the provisional director and the corporation.
(d) Even though the requirements of subsection (b) relating to the number of directors or shareholders who may petition for appointment of a provisional director are not satisfied, the circuit court of the county may nevertheless appoint a provisional director if permitted by subsection (b) of Section 10A-30-2.09.
(Acts 1980, No. 80-633, p. 1094, §171; §10-2A-310; amended and renumbered by Act 2009-513, p. 967, §374.)
No written agreement among shareholders of a close corporation, nor any provision of the governing documents of the corporation, which agreement or provision relates to any phase of the affairs of such corporation, including but not limited to the management of its business or declaration and payment of dividends or other division of profits or the election of directors or officers or the employment of shareholders by the corporation or the arbitration of disputes, shall be invalid on the ground that it is an attempt by the parties to the agreement or by the shareholders of the corporation to treat the corporation as if it were a partnership or to arrange relations among the shareholders or between the shareholders and the corporation in a manner that would be appropriate only among partners.
(Acts 1980, No. 80-633, p. 1094, §172; §10-2A-311; amended and renumbered by Act 2009-513, p. 967, §374.)
(a) The certificate of formation of any close corporation may include a provision granting to any shareholder, or to the holders of any specified number or percentage of shares of any class of shares, an option to have the corporation dissolved at will or upon the occurrence of any specified event or contingency. Whenever any such option to dissolve is exercised, the shareholders exercising the option shall give written notice thereof to all other shareholders. After the expiration of 30 days following the sending of the notice, the dissolution of the corporation shall proceed as if the required number of shareholders having voting power had consented in writing to dissolution of the corporation as provided by the Alabama Business Corporation Law.
(b) If the certificate of formation as originally filed does not contain a provision authorized by subsection (a), the certificate of formation may be amended to include such provision if adopted by the affirmative vote of the holders of all the outstanding shares, whether or not entitled to vote, unless the certificate of formation specifically authorizes such an amendment by a vote which shall be not less than two-thirds of all the outstanding shares whether or not entitled to vote.
(c) Each certificate for shares in any corporation whose certificate of formation authorizes dissolution as permitted by this section shall conspicuously note on the face thereof the existence of the provision. Unless noted conspicuously on the face of the certificate for shares the provision is ineffective.
(Acts 1980, No. 80-633, p. 1094, §173; §10-2A-312; amended and renumbered by Act 2009-513, p. 967, §374; Act 2019-94, §2.)
This article shall not be deemed to repeal any statute or rule of law which is or would be applicable to any corporation which is governed by the Alabama Business Corporation Law but is not a close corporation.
(Acts 1980, No. 80-633, p. 1094, §174; §10-2A-313; amended and renumbered by Act 2009-513, p. 967, §374; Act 2019-94, §2.)
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