Alabama Enacts New Corporation Law
ComplianceDecember 19, 2019

Alabama Enacts New Corporation Law

Highlights from Alabama's new corporation law HB250

House Bill 250, effective January 1, 2020, enacts a new Alabama Business Corporation Law. This law represents a complete revision of the statute governing Alabama corporations. It is based on the current version of the Revised Model Business Corporation Act with some provisions adopted from the Delaware General Corporation Law and some non-Model Act provisions retained from the old (pre-2020) law as well. The new law is codified at Sec. 10A-2A-1.01 et seq. of the Code of Alabama.

Below are some highlights of the new law that directors, officers, and stockholders of Alabama corporations, and lawyers with Alabama corporations as clients may wish to take note of. (All cites are to the new law. References to the “old law” refer to the law in effect before January 1, 2020.)

Incorporation

An Alabama corporation is incorporated under the new law by filing a Certificate of Incorporation with the Secretary of State. (Sec. 10A-2A-2.01) Under the old law, Articles of Incorporation were filed on the county level with the judge of probate.

Amendment and dissolution filings

Certificates of Amendment and Certificates of Dissolution are also filed with the Secretary of State under the new law. (Sec. 10A-2A-10.06 and Sec. 10A-2A-14.03) Under the old law, Articles of Amendment and Articles of Dissolution were filed on the county level with the judge of probate.

Preemptive rights 

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. (Sec. 10A-2A-6.30). Under the old law, stockholders had a preemptive right unless it was denied in the Articles of Incorporation.

Corporate opportunities

The Certificate of Incorporation may contain a provision limiting or eliminating any duty of a director or any other person to offer a business opportunity to the corporation before pursuing it themselves. (Sec. 10A-2A-2.02)

Action by written consent

Actions may be taken by stockholders by written consent, without a meeting, if the number of stockholders having not less than the minimum number of votes needed to take the action at a meeting so consent. (Sec. 10A-2A-7.04) Previously, unanimous consent was required.

Forum selection clauses

The Certificate of Incorporation or the bylaws may require that internal corporate claims be brought exclusively in any specified court of the state and, if so specified, in any additional courts in any other jurisdictions with which the corporation has a reasonable relationship. (Sec. 10A-2A-2.07)

Ratification of defective acts

A procedure is created whereby a board of directors may take actions to ratify a defective corporate act and whereby a circuit court may take certain actions regarding the validity of corporate acts and ratifications. (Sec. 10-2A-1.45 through Sec. 10A-2A-1.52)

Remote participation in meetings

Stockholders of any class or series 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. (Sec. 10A-2A-7.09)

Virtual stockholder meetings

The board of directors may determine to hold a stockholders’ meeting solely by means of remote communication unless the Certificate of Incorporation or bylaws requires the meeting to be held at a place. (Sec. 10A-2A-7.09)

Voting on mergers

Unless the Certificate of Incorporation or the board of directors requires a greater vote, a plan of merger requires the approval of the stockholders consisting of a majority of the votes entitled to be cast on the plan. (Sec. 10A-2A-11.04) The old law required a two-thirds vote unless otherwise provided by the articles or board.

Transition provisions

The new law applies to all corporations incorporated on or after January 1, 2020, and to a corporation incorporated before January 1, 2020, which elects, by amending or restating the corporation’s certificate of incorporation, to be governed by the new law. On and after January 1, 2021, all corporations will be governed by the new law. (Sec. 10A-2A-17.01)

Conclusion

This article has highlighted just a few of the changes made by the new Alabama Business Corporation Law. Lawyers that advise Alabama corporations, as well as corporate management and stockholders, may wish to familiarize themselves with this new corporation law in its entirety. That will help them to decide if it is in a pre-existing corporation’s best interests to opt into the new law before 2021 to take advantage of some of the new provisions. They may also wish to review the corporation’s articles of incorporation and bylaws to see if any amendments must, or should be made after the corporation is governed by the new law. 

Sandra Feldman
Publications Attorney
Sandra (Sandy) Feldman has been with CT Corporation since 1985 and has been the Publications Attorney since 1988. Sandy stays on top of the most pressing and pertinent business entity law issues that impact CT customers of all sizes and segments.
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