Read the full stored bill text
HB248 ENROLLED
Page 0
HB248
ARKTHQS-3
By Representative Faulkner
RFD: Judiciary
First Read: 15-Jan-26
1
2
3
4
5
HB248 Enrolled
Page 1
First Read: 15-Jan-26
Enrolled, An Act,
Relating to the Alabama Business and Nonprofit Entities
Code; to amend Sections 10A-1-1.04, 10A-1-1.11, 10A-1-1.13,
10A-1-2.17, 10A-1-3.32, 10A-1-4.14, 10A-1-4.21, 10A-1-4.23,
10A-1-4.24, 10A-1-4.25, and 10A-1-5.31, Section 10A-1-7.01, as
amended by Act 2025-281, 2025 Regular Session, Sections
10A-1-7.11, 10A-2A-1.43, 10A-2A-2.02, 10A-2A-2.05,
10A-2A-2.07, 10A-2A-6.22, 10A-2A-8.27, 10A-2A-8.60,
10A-2A-14.10, 10A-2A-16.02, 10A-2A-16.03, 10A-2A-16.04,
10A-3A-1.60, 10A-3A-2.02, 10A-3A-2.07, 10A-3A-4.02,
10A-3A-4.03, and 10A-3A-4.04, Section 8 of Act 2025-281, now
appearing as Section 10A-3A-8.26, Sections 10A-3A-8.60,
10A-5A-4.09, and 10A-8A-4.10, Section 10A-8A-5.02, as amended
by Act 2025-281, 2025 Regular Session, Sections 10A-9A-3.04
and 10A-17-1.02, Code of Alabama 1975; to add Division G,
consisting of Section 10A-2A-8.70, to Article 8 of Chapter 2A,
Title 10A, Code of Alabama 1975; to add Sections 10A-3A-6.14,
10A-3A-8.61, and 10A-3A-8.62 to the Code of Alabama 1975; to
add Division G, consisting of Section 10A-3A-8.70, to Article
8 of Chapter 3A, Title 10A, Code of Alabama 1975; to make
technical corrections; to make technical corrections and
codify common law; to clarify the law governing entities and
clarify the internal affairs doctrine, thereby codifying
common law; to provide a new procedure to correct or nullify
filing instruments; to clarify that a registered agent may not
perform its duties virtually; to clarify the process for a
foreign entity doing business in the state that is withdrawing
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
HB248 Enrolled
Page 2
foreign entity doing business in the state that is withdrawing
its certificate of authority to transact business in this
state; to clarify certain proxy matters allowed in bylaws of
business corporations and to clarify the forum selection
provisions for business corporations and nonprofit
corporations; to clarify the procedures, processes, rights,
and responsibilities of owners and entities regarding records
requests, to provide for expedited court review in the event
of noncompliance, and to allow the court in any expedited
review to determine the allocation among the parties to the
review; to clarify the duties of stockholders to business
corporations and fellow stockholders; to provide procedures
for officers, directors, stockholders, and members of business
corporations and nonprofit corporations to follow when the
officers, directors, stockholders, and members of business
corporations and nonprofit corporations are involved in a
conflicting transaction or a corporate opportunity
transaction, or both, which if followed would provide the
officers, directors, stockholders, and members of business
corporations and nonprofit corporations with certain safe
harbors; to authorize existing nonprofit corporations to opt
out of the amendatory provisions of this act pertaining to
Chapter 3A of Title 10A, Code of Alabama 1975; and to repeal
Sections 10A-2A-16.10 and 10A-3A-4.20, Code of Alabama 1975,
providing for financial statements for stockholders and
members, respectively.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. Sections 10A-1-1.04, 10A-1-1.11, 10A-1-1.13,
10A-1-2.17, 10A-1-3.32, 10A-1-4.14, 10A-1-4.21, 10A-1-4.23,
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54
55
56
HB248 Enrolled
Page 3
10A-1-2.17, 10A-1-3.32, 10A-1-4.14, 10A-1-4.21, 10A-1-4.23,
10A-1-4.24, 10A-1-4.25, and 10A-1-5.31, Section 10A-1-7.01, as
amended by Act 2025-281, 2025 Regular Session, Sections
10A-1-7.11, 10A-2A-1.43, 10A-2A-2.02, 10A-2A-2.05,
10A-2A-2.07, 10A-2A-6.22, 10A-2A-8.27, 10A-2A-8.60,
10A-2A-14.10, 10A-2A-16.02, 10A-2A-16.03, 10A-2A-16.04,
10A-3A-1.60, 10A-3A-2.02, 10A-3A-2.07, 10A-3A-4.02,
10A-3A-4.03, and 10A-3A-4.04, Section 8 of Act 2025-281, now
appearing as Section 10A-3A-8.26, Sections 10A-3A-8.60,
10A-5A-4.09, and 10A-8A-4.10, Section 10A-8A-5.02, as amended
by Act 2025-281, 2025 Regular Session, and Sections
10A-9A-3.04 and 10A-17-1.02, Code of Alabama 1975, are amended
to read as follows:
"§10A-1-1.04
(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.
(a) For (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
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
HB248 Enrolled
Page 4
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.
(b)(c) For purposes of subsection (a)(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
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
101
102
103
104
105
106
107
108
109
110
111
112
HB248 Enrolled
Page 5
(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."
"§10A-1-1.11
(a) The law of this state governs the formation and
internal affairs of an entity if the entity's formation occurs
when a certificate of formation filed in accordance with
Article 4 takes effect. 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.
(b)(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
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
HB248 Enrolled
Page 6
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 members 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. "
"§10A-1-1.13
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;
and
(2) matters relating to its membership or ownership
interests , other than the right of members or owners to
inspect entity records. ; and
(3) matters which are peculiar to the relationships
among or between the entity and its governing authority,
governing persons, officers, owners, and members. "
"§10A-1-2.17
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
HB248 Enrolled
Page 7
"§10A-1-2.17
Except as otherwise provided in the governing documents
or in the specific article 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."
"§10A-1-3.32
(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, and 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 are 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
169
170
171
172
173
174
175
176
177
178
179
180
181
182
183
184
185
186
187
188
189
190
191
192
193
194
195
196
HB248 Enrolled
Page 8
expense of, any owner or member or the owner's or member's
agent or attorney during regular business hours . The right of
access extends to the legal representative of a deceased owner
or member or owner or member under legal disability. The
entity shall also provide former owners and members with
access to its books and records pertaining to the period
during which they were owners or members 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
197
198
199
200
201
202
203
204
205
206
207
208
209
210
211
212
213
214
215
216
217
218
219
220
221
222
223
224
HB248 Enrolled
Page 9
(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
225
226
227
228
229
230
231
232
233
234
235
236
237
238
239
240
241
242
243
244
245
246
247
248
249
250
251
252
HB248 Enrolled
Page 10
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.
(c) The (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.
(d) Any agent or governing person of a domestic entity
who, without reasonable cause, refuses to allow any owner or
member or the owner's or member's agent or legal counsel to
inspect any books or records of that entity shall be
personally liable to the agent or member for a penalty in an
amount not to exceed 10 percent of the fair market value of
the ownership interest of the owner or member, in addition to
any other damages or remedy.
(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
253
254
255
256
257
258
259
260
261
262
263
264
265
266
267
268
269
270
271
272
273
274
275
276
277
278
279
280
HB248 Enrolled
Page 11
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
281
282
283
284
285
286
287
288
289
290
291
292
293
294
295
296
297
298
299
300
301
302
303
304
305
306
307
308
HB248 Enrolled
Page 12
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. "
"§10A-1-4.14
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; or
(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. "
"§10A-1-4.21
(a) A Whenever any filing instrument that has been
filed with authorized to be delivered to a filing officer that
is an inaccurate record of the event or transaction evidenced
in the instrument, that for filing under any provision of this
title has been filed by the filing officer, and contains an
inaccurate or erroneous statement, or that was defectively or
erroneously signed, sealed, acknowledged, or verified , the
filing instrument may be corrected or nullified by filing
delivering a certificate of correction or a certificate of
nullification of the instrument, as the case may be, to the
309
310
311
312
313
314
315
316
317
318
319
320
321
322
323
324
325
326
327
328
329
330
331
332
333
334
335
336
HB248 Enrolled
Page 13
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."
"§10A-1-4.23
(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 with 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
337
338
339
340
341
342
343
344
345
346
347
348
349
350
351
352
353
354
355
356
357
358
359
360
361
362
363
364
HB248 Enrolled
Page 14
(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. "
"§10A-1-4.24
The certificate of correction and the certificate of
nullification shall be filed with and acted on by the filing
officer delivered to the filing officer for filing as provided
in Section 10A-1-4.02."
"§10A-1-4.25
(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) As to a person who acted in reliance on the filing
instrument prior to its correction and who is adversely
affected by that correction, the filing instrument is
considered to have been corrected on the date the certificate
of correction is filed.
(c) An acknowledgment of filing or a similar instrument
issued by the filing officer before a filing instrument is
corrected, with respect to the effect of filing the original
filing instrument, applies to the corrected filing instrument
as of the date the corrected filing instrument is considered
to have been filed under this section.
365
366
367
368
369
370
371
372
373
374
375
376
377
378
379
380
381
382
383
384
385
386
387
388
389
390
391
392
HB248 Enrolled
Page 15
to have been filed under this section.
(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. "
"§10A-1-5.31
(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; and
393
394
395
396
397
398
399
400
401
402
403
404
405
406
407
408
409
410
411
412
413
414
415
416
417
418
419
420
HB248 Enrolled
Page 16
registered to transact business in this state; and
(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."
"§10A-1-7.01
(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
421
422
423
424
425
426
427
428
429
430
431
432
433
434
435
436
437
438
439
440
441
442
443
444
445
446
447
448
HB248 Enrolled
Page 17
(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 (b)(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."
"§10A-1-7.11
(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.
449
450
451
452
453
454
455
456
457
458
459
460
461
462
463
464
465
466
467
468
469
470
471
472
473
474
475
476
HB248 Enrolled
Page 18
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
477
478
479
480
481
482
483
484
485
486
487
488
489
490
491
492
493
494
495
496
497
498
499
500
501
502
503
504
HB248 Enrolled
Page 19
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
505
506
507
508
509
510
511
512
513
514
515
516
517
518
519
520
521
522
523
524
525
526
527
528
529
530
531
532
HB248 Enrolled
Page 20
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. "
"§10A-2A-1.43
(a) 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 business 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 director's conflicting interest
transaction or who sought a disclaimer of the corporation's
interest in a business corporate opportunity under Section
10A-2A-8.60 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
533
534
535
536
537
538
539
540
541
542
543
544
545
546
547
548
549
550
551
552
553
554
555
556
557
558
559
560
HB248 Enrolled
Page 21
of this subsection (a)(2); or
(3) Section 10A-2A-8.60, is not a director (i) as to
whom the contract act or transaction is a director's
conflicting interest transaction, (ii) who has a material
relationship with another director as to whom the act or
transaction is a director's conflicting interest transaction,
or (iii) pursues or takes advantage of the business
opportunity, directly, or indirectly through or on behalf of
another person, or (iv) has a material relationship with a
director or officer who pursues or takes advantage of the
business opportunity, directly, or indirectly through or on
behalf of another person. 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) For purposes of this section:
(1) 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
561
562
563
564
565
566
567
568
569
570
571
572
573
574
575
576
577
578
579
580
581
582
583
584
585
586
587
588
HB248 Enrolled
Page 22
objectivity of the director's judgment when participating in
the action to be taken; and 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.
(2) "material interest" means an actual or potential
benefit or detriment (other than one which would devolve on
the corporation or the stockholders generally) that would
reasonably be expected to impair the objectivity of the
director's judgment when participating in the action to be
taken.
(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 relationship with that
director 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."
"§10A-2A-2.02
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;
589
590
591
592
593
594
595
596
597
598
599
600
601
602
603
604
605
606
607
608
609
610
611
612
613
614
615
616
HB248 Enrolled
Page 23
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
617
618
619
620
621
622
623
624
625
626
627
628
629
630
631
632
633
634
635
636
637
638
639
640
641
642
643
644
HB248 Enrolled
Page 24
(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, business corporate opportunities, before the
pursuit or taking of the corporate opportunity by the director
or other person; provided that any application of that
645
646
647
648
649
650
651
652
653
654
655
656
657
658
659
660
661
662
663
664
665
666
667
668
669
670
671
672
HB248 Enrolled
Page 25
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:
673
674
675
676
677
678
679
680
681
682
683
684
685
686
687
688
689
690
691
692
693
694
695
696
697
698
699
700
HB248 Enrolled
Page 26
(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 (d)(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
701
702
703
704
705
706
707
708
709
710
711
712
713
714
715
716
717
718
719
720
721
722
723
724
725
726
727
728
HB248 Enrolled
Page 27
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."
"§10A-2A-2.05
(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 both more of the
729
730
731
732
733
734
735
736
737
738
739
740
741
742
743
744
745
746
747
748
749
750
751
752
753
754
755
756
HB248 Enrolled
Page 28
(c) The bylaws may contain one or both more of the
following 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) a requirement that if the corporation solicits
proxies or consents with respect to an election of directors,
the corporation include in its proxy statement and any form of
its proxy or consent, to the extent and subject to any
procedures or conditions as are provided in the bylaws, one or
more individuals nominated by a stockholder in addition to
individuals nominated by the board of directors; and
(2) a requirement that the corporation reimburse the
expenses incurred by a stockholder in soliciting proxies or
consents in connection with an election of directors, to the
extent and subject to any procedures and conditions as are
provided in the bylaws, 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
757
758
759
760
761
762
763
764
765
766
767
768
769
770
771
772
773
774
775
776
777
778
779
780
781
782
783
784
HB248 Enrolled
Page 29
(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
785
786
787
788
789
790
791
792
793
794
795
796
797
798
799
800
801
802
803
804
805
806
807
808
809
810
811
812
HB248 Enrolled
Page 30
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."
813
814
815
816
817
818
819
820
821
822
823
824
825
826
827
828
829
830
831
832
833
834
835
836
837
838
839
840
HB248 Enrolled
Page 31
provisions of this chapter."
"§10A-2A-2.07
(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) A provision of the certificate of incorporation or
bylaws adopted under subsection (a) shall not have the effect
of conferring jurisdiction on any court or over any person or
claim, and shall not apply if none of the courts specified by
that provision has the requisite personal and subject matter
jurisdiction. If the court or courts of this state specified
in a provision adopted under subsection (a) do not have the
requisite personal and subject matter jurisdiction and another
court of this state does have jurisdiction, then the internal
corporate claim may be brought in the other court of this
state, notwithstanding that the other court of this state is
not specified in that provision, and in any other court
specified in that provision that has the requisite
jurisdiction.
(c) No provision of the certificate of incorporation or
the bylaws may prohibit bringing an internal corporate claim
in the courts of this state or require those claims to be
841
842
843
844
845
846
847
848
849
850
851
852
853
854
855
856
857
858
859
860
861
862
863
864
865
866
867
868
HB248 Enrolled
Page 32
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.
(d)(c) "Internal corporate claim" means, for the
purposes of this section, (i) 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) any
that is a derivative action or proceeding brought on behalf of
the corporation, (iii) any action asserting a claim arising
pursuant to any provision of this chapter or the certificate
of incorporation or bylaws, 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
869
870
871
872
873
874
875
876
877
878
879
880
881
882
883
884
885
886
887
888
889
890
891
892
893
894
895
896
HB248 Enrolled
Page 33
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) any action asserting a claim 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. "
"§10A-2A-6.22
(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
897
898
899
900
901
902
903
904
905
906
907
908
909
910
911
912
913
914
915
916
917
918
919
920
921
922
923
924
HB248 Enrolled
Page 34
(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
925
926
927
928
929
930
931
932
933
934
935
936
937
938
939
940
941
942
943
944
945
946
947
948
949
950
951
952
HB248 Enrolled
Page 35
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). "
"§10A-2A-8.27
(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
953
954
955
956
957
958
959
960
961
962
963
964
965
966
967
968
969
970
971
972
973
974
975
976
977
978
979
980
HB248 Enrolled
Page 36
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. "
"§10A-2A-8.60
(a) No contract or transaction between a corporation
and one or more of its directors or officers, or between a
corporation and any other corporation, partnership,
association, or other entity in which one or more of its
directors or officers, are directors or officers, or have a
financial interest, shall be void or voidable solely for this
reason, or solely because the director or officer is present
at or participates in the meeting of the board of directors or
committee which authorizes the contract or transaction, or
solely because the director's or officer's votes are counted
for that purpose, if:
(1) The material facts as to the director's or
officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the board of
981
982
983
984
985
986
987
988
989
990
991
992
993
994
995
996
997
998
999
1000
1001
1002
1003
1004
1005
1006
1007
1008
HB248 Enrolled
Page 37
transaction are disclosed or are known to the board of
directors or the committee, and the board or committee in good
faith authorizes the contract or transaction by the
affirmative votes of a majority of the qualified directors,
even though the qualified directors be less than a quorum; or
(2) The material facts as to the director's or
officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the
stockholders; or
(3) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved or
ratified, by the board of directors, a committee, or the
stockholders.
(b) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board
of directors or of a committee which authorizes the contract
or transaction.
(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
1009
1010
1011
1012
1013
1014
1015
1016
1017
1018
1019
1020
1021
1022
1023
1024
1025
1026
1027
1028
1029
1030
1031
1032
1033
1034
1035
1036
HB248 Enrolled
Page 38
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
1037
1038
1039
1040
1041
1042
1043
1044
1045
1046
1047
1048
1049
1050
1051
1052
1053
1054
1055
1056
1057
1058
1059
1060
1061
1062
1063
1064
HB248 Enrolled
Page 39
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
1065
1066
1067
1068
1069
1070
1071
1072
1073
1074
1075
1076
1077
1078
1079
1080
1081
1082
1083
1084
1085
1086
1087
1088
1089
1090
1091
1092
HB248 Enrolled
Page 40
(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,
1093
1094
1095
1096
1097
1098
1099
1100
1101
1102
1103
1104
1105
1106
1107
1108
1109
1110
1111
1112
1113
1114
1115
1116
1117
1118
1119
1120
HB248 Enrolled
Page 41
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
1121
1122
1123
1124
1125
1126
1127
1128
1129
1130
1131
1132
1133
1134
1135
1136
1137
1138
1139
1140
1141
1142
1143
1144
1145
1146
1147
1148
HB248 Enrolled
Page 42
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:
1149
1150
1151
1152
1153
1154
1155
1156
1157
1158
1159
1160
1161
1162
1163
1164
1165
1166
1167
1168
1169
1170
1171
1172
1173
1174
1175
1176
HB248 Enrolled
Page 43
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
1177
1178
1179
1180
1181
1182
1183
1184
1185
1186
1187
1188
1189
1190
1191
1192
1193
1194
1195
1196
1197
1198
1199
1200
1201
1202
1203
1204
HB248 Enrolled
Page 44
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.
1205
1206
1207
1208
1209
1210
1211
1212
1213
1214
1215
1216
1217
1218
1219
1220
1221
1222
1223
1224
1225
1226
1227
1228
1229
1230
1231
1232
HB248 Enrolled
Page 45
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
1233
1234
1235
1236
1237
1238
1239
1240
1241
1242
1243
1244
1245
1246
1247
1248
1249
1250
1251
1252
1253
1254
1255
1256
1257
1258
1259
1260
HB248 Enrolled
Page 46
(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
1261
1262
1263
1264
1265
1266
1267
1268
1269
1270
1271
1272
1273
1274
1275
1276
1277
1278
1279
1280
1281
1282
1283
1284
1285
1286
1287
1288
HB248 Enrolled
Page 47
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:
1289
1290
1291
1292
1293
1294
1295
1296
1297
1298
1299
1300
1301
1302
1303
1304
1305
1306
1307
1308
1309
1310
1311
1312
1313
1314
1315
1316
HB248 Enrolled
Page 48
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
1317
1318
1319
1320
1321
1322
1323
1324
1325
1326
1327
1328
1329
1330
1331
1332
1333
1334
1335
1336
1337
1338
1339
1340
1341
1342
1343
1344
HB248 Enrolled
Page 49
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. "
"§10A-2A-14.10
(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
1345
1346
1347
1348
1349
1350
1351
1352
1353
1354
1355
1356
1357
1358
1359
1360
1361
1362
1363
1364
1365
1366
1367
1368
1369
1370
1371
1372
HB248 Enrolled
Page 50
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 , oppressive, 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
1373
1374
1375
1376
1377
1378
1379
1380
1381
1382
1383
1384
1385
1386
1387
1388
1389
1390
1391
1392
1393
1394
1395
1396
1397
1398
1399
1400
HB248 Enrolled
Page 51
(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."
"§10A-2A-16.02
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
1401
1402
1403
1404
1405
1406
1407
1408
1409
1410
1411
1412
1413
1414
1415
1416
1417
1418
1419
1420
1421
1422
1423
1424
1425
1426
1427
1428
HB248 Enrolled
Page 52
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
1429
1430
1431
1432
1433
1434
1435
1436
1437
1438
1439
1440
1441
1442
1443
1444
1445
1446
1447
1448
1449
1450
1451
1452
1453
1454
1455
1456
HB248 Enrolled
Page 53
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:
(1)(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
1457
1458
1459
1460
1461
1462
1463
1464
1465
1466
1467
1468
1469
1470
1471
1472
1473
1474
1475
1476
1477
1478
1479
1480
1481
1482
1483
1484
HB248 Enrolled
Page 54
(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;
(2)(iv) the stockholder's demand describes with
reasonable particularity the stockholder's purpose and the
records the stockholder desires to inspect; and
(3)(v) the records are directly connected with 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)(1) 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
1485
1486
1487
1488
1489
1490
1491
1492
1493
1494
1495
1496
1497
1498
1499
1500
1501
1502
1503
1504
1505
1506
1507
1508
1509
1510
1511
1512
HB248 Enrolled
Page 55
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.
(2) If a stockholder is entitled to inspect and copy
the records described in subsection (a) or having met the
requirements of subsection (c) is entitled to inspect and copy
the records described in subsection (b), and an officer of the
corporation with the authority to bind the corporation who, or
a corporation which, without reasonable cause, refuses to
allow that stockholder to inspect and copy those records shall
be liable to that stockholder for a penalty of an amount not
to exceed 10 percent of the value of the shares of stock owned
by that stockholder, in addition to any other damages or
remedy afforded that stockholder by law. It shall be a defense
to an action brought to collect the penalty specified in this
section that the stockholder suing therefor has previously
1513
1514
1515
1516
1517
1518
1519
1520
1521
1522
1523
1524
1525
1526
1527
1528
1529
1530
1531
1532
1533
1534
1535
1536
1537
1538
1539
1540
HB248 Enrolled
Page 56
section that the stockholder suing therefor has previously
sold or offered for sale any list of stockholders of the
corporation, or any other corporation or knowingly has aided
or abetted any person in procuring any list of stockholders,
or improperly has used any information secured through any
prior inspection of those records of the corporation, or was
not acting in good faith or for a proper purpose in making
this demand.
(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 :
(1) the right of a stockholder to inspect records under
Section 10A-2A-7.20 or, if the stockholder is in litigation
1541
1542
1543
1544
1545
1546
1547
1548
1549
1550
1551
1552
1553
1554
1555
1556
1557
1558
1559
1560
1561
1562
1563
1564
1565
1566
1567
1568
HB248 Enrolled
Page 57
Section 10A-2A-7.20 or, if the stockholder 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 and to impose reasonable restrictions as provided
in Section 10A-2A-16.04(c), provided that, in the case of
production of records described in subsection (b) of this
section at the request of a stockholder, the stockholder has
met the requirements of subsection (c).
(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
1569
1570
1571
1572
1573
1574
1575
1576
1577
1578
1579
1580
1581
1582
1583
1584
1585
1586
1587
1588
1589
1590
1591
1592
1593
1594
1595
1596
HB248 Enrolled
Page 58
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. "
"§10A-2A-16.03
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
1597
1598
1599
1600
1601
1602
1603
1604
1605
1606
1607
1608
1609
1610
1611
1612
1613
1614
1615
1616
1617
1618
1619
1620
1621
1622
1623
1624
HB248 Enrolled
Page 59
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."
"§10A-2A-16.04
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
1625
1626
1627
1628
1629
1630
1631
1632
1633
1634
1635
1636
1637
1638
1639
1640
1641
1642
1643
1644
1645
1646
1647
1648
1649
1650
1651
1652
HB248 Enrolled
Page 60
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. "
"§10A-3A-1.60
(a) 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 business corporate opportunities to the
1653
1654
1655
1656
1657
1658
1659
1660
1661
1662
1663
1664
1665
1666
1667
1668
1669
1670
1671
1672
1673
1674
1675
1676
1677
1678
1679
1680
HB248 Enrolled
Page 61
to offer potential business 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 director's conflicting interest
transaction or who sought a disclaimer of the nonprofit
corporation's interest in a business corporate opportunity
under Section 10A-2A-8.60 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); or
(3) Section 10A-2A-8.60 Sections 10A-3A-8.61 or
10A-3A-8.62 , is not a director (i) as to whom the contract act
or transaction is a director's conflicting interest
transaction, (ii) who has a material relationship with another
director as to whom the act or transaction is a director's
conflicting interest transaction, or (iii) who pursues or
takes advantage of the business opportunity, directly, or
indirectly through or on behalf of another person, or (iv) 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 the business a corporate
opportunity, directly, or indirectly through or on behalf of
1681
1682
1683
1684
1685
1686
1687
1688
1689
1690
1691
1692
1693
1694
1695
1696
1697
1698
1699
1700
1701
1702
1703
1704
1705
1706
1707
1708
HB248 Enrolled
Page 62
opportunity, directly, or indirectly through or on behalf of
another person.
(b) For purposes of this section:
(1) "MATERIAL RELATIONSHIP" 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 action to be
taken; and negotiation, authorization, or approval of the act
or transaction at issue.
(2) "MATERIAL INTEREST" means an actual or potential
benefit or detriment (other than one which would devolve on
the nonprofit corporation or the members generally) that would
reasonably be expected to impair the objectivity of the
director's judgment when participating in the action to be
taken.
(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 relationship with that
director 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
1709
1710
1711
1712
1713
1714
1715
1716
1717
1718
1719
1720
1721
1722
1723
1724
1725
1726
1727
1728
1729
1730
1731
1732
1733
1734
1735
1736
HB248 Enrolled
Page 63
director with respect to the matter (or any individual who has
a material relationship with that director), is or was also a
director."
"§10A-3A-2.02
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;
1737
1738
1739
1740
1741
1742
1743
1744
1745
1746
1747
1748
1749
1750
1751
1752
1753
1754
1755
1756
1757
1758
1759
1760
1761
1762
1763
1764
HB248 Enrolled
Page 64
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) subject to Section 10A-3A-4.20, 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
1765
1766
1767
1768
1769
1770
1771
1772
1773
1774
1775
1776
1777
1778
1779
1780
1781
1782
1783
1784
1785
1786
1787
1788
1789
1790
1791
1792
HB248 Enrolled
Page 65
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-8.60, 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
1793
1794
1795
1796
1797
1798
1799
1800
1801
1802
1803
1804
1805
1806
1807
1808
1809
1810
1811
1812
1813
1814
1815
1816
1817
1818
1819
1820
HB248 Enrolled
Page 66
(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
1821
1822
1823
1824
1825
1826
1827
1828
1829
1830
1831
1832
1833
1834
1835
1836
1837
1838
1839
1840
1841
1842
1843
1844
1845
1846
1847
1848
HB248 Enrolled
Page 67
(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(d)
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
1849
1850
1851
1852
1853
1854
1855
1856
1857
1858
1859
1860
1861
1862
1863
1864
1865
1866
1867
1868
1869
1870
1871
1872
1873
1874
1875
1876
HB248 Enrolled
Page 68
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."
"§10A-3A-2.07
(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
1877
1878
1879
1880
1881
1882
1883
1884
1885
1886
1887
1888
1889
1890
1891
1892
1893
1894
1895
1896
1897
1898
1899
1900
1901
1902
1903
1904
HB248 Enrolled
Page 69
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) A provision of the certificate of incorporation or
bylaws adopted under subsection (a) shall not have the effect
of conferring jurisdiction on any court or over any person or
claim, and shall not apply if none of the courts specified by
that provision has the requisite personal and subject matter
jurisdiction. If the court or courts of this state specified
in a provision adopted under subsection (a) do not have the
requisite personal and subject matter jurisdiction and another
court of this state does have jurisdiction, then the internal
corporate claim may be brought in the other court of this
state, notwithstanding that the other court of this state is
not specified in that provision, and in any other court
specified in that provision that has the requisite
jurisdiction.
(c) No provision of the certificate of incorporation or
the bylaws may prohibit bringing an internal corporate claim
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
1905
1906
1907
1908
1909
1910
1911
1912
1913
1914
1915
1916
1917
1918
1919
1920
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
HB248 Enrolled
Page 70
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.
(d)(c) "Internal corporate claim" means, for the
purposes of this section, (i) 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) any
action asserting a claim arising pursuant to any provision of
this chapter or the certificate of incorporation or bylaws,
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) any action asserting a claim
that is governed by the internal affairs doctrine that is not
1933
1934
1935
1936
1937
1938
1939
1940
1941
1942
1943
1944
1945
1946
1947
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
HB248 Enrolled
Page 71
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. "
"§10A-3A-4.02
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:
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
HB248 Enrolled
Page 72
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
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
HB248 Enrolled
Page 73
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:
(1)(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;
(2)(iii) the member's demand describes with reasonable
particularity the member's purpose and the records the member
desires to inspect; and
(3)(iv) the records are directly connected with 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
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
HB248 Enrolled
Page 74
(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
2045
2046
2047
2048
2049
2050
2051
2052
2053
2054
2055
2056
2057
2058
2059
2060
2061
2062
2063
2064
2065
2066
2067
2068
2069
2070
2071
2072
HB248 Enrolled
Page 75
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 its 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) Subject to Section 10A-3A-4.20, the 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 :
(1) 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 ; or.
(2) the power of a court, independently of this
chapter, to compel the production of corporate records for
examination and to impose reasonable restrictions as provided
in Section 10A-3A-4.04(c), provided that, in the case of
production of records described in subsection (b) of this
section at the request of the member, the member has met the
requirements of subsection (c) of this section.
(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
2073
2074
2075
2076
2077
2078
2079
2080
2081
2082
2083
2084
2085
2086
2087
2088
2089
2090
2091
2092
2093
2094
2095
2096
2097
2098
2099
2100
HB248 Enrolled
Page 76
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. "
"§10A-3A-4.03
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 cost costs ."
2101
2102
2103
2104
2105
2106
2107
2108
2109
2110
2111
2112
2113
2114
2115
2116
2117
2118
2119
2120
2121
2122
2123
2124
2125
2126
2127
2128
HB248 Enrolled
Page 77
those cost costs ."
"§10A-3A-4.04
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.
2129
2130
2131
2132
2133
2134
2135
2136
2137
2138
2139
2140
2141
2142
2143
2144
2145
2146
2147
2148
2149
2150
2151
2152
2153
2154
2155
2156
HB248 Enrolled
Page 78
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 it 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. "
"§10A-3A-8.26
(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.
2157
2158
2159
2160
2161
2162
2163
2164
2165
2166
2167
2168
2169
2170
2171
2172
2173
2174
2175
2176
2177
2178
2179
2180
2181
2182
2183
2184
HB248 Enrolled
Page 79
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. "
2185
2186
2187
2188
2189
2190
2191
2192
2193
2194
2195
2196
2197
2198
2199
2200
2201
2202
2203
2204
2205
2206
2207
2208
2209
2210
2211
2212
HB248 Enrolled
Page 80
contained in the agreement, instrument, plan, or document. "
"§10A-3A-8.60
(a) No contract or transaction between a nonprofit
corporation and one or more of its directors or officers, or
between a nonprofit corporation and any other corporation,
partnership, association, or other entity in which one or more
of its directors or officers, are directors or officers, or
have a financial interest, shall be void or voidable solely
for this reason, or solely because the director or officer is
present at or participates in the meeting of the board of
directors or committee which authorizes the contract or
transaction, or solely because the director's or officer's
votes are counted for that purpose, if:
(1) The material facts as to the director's or
officer's relationship or interest and as to the contract or
transaction are disclosed or are known to the board of
directors or the committee of a nonmembership nonprofit
corporation, and the board or committee in good faith
authorizes the contract or transaction by the affirmative
votes of a majority of the qualified directors, even though
the qualified directors be less than a quorum; or
(2) The material facts as to the director's or
officer's relationship or interest and as to the contract or
transaction are disclosed or are known to (i) the members in a
membership nonprofit corporation entitled to vote thereon or
(ii) the qualified directors of the board of directors in a
membership nonprofit corporation, and the contract or
transaction is specifically approved in good faith by vote of
the members in a membership nonprofit corporation or the
2213
2214
2215
2216
2217
2218
2219
2220
2221
2222
2223
2224
2225
2226
2227
2228
2229
2230
2231
2232
2233
2234
2235
2236
2237
2238
2239
2240
HB248 Enrolled
Page 81
the members in a membership nonprofit corporation or the
qualified directors of the board of directors in a membership
nonprofit corporation; or
(3) The contract or transaction is fair as to the
nonprofit corporation as of the time it is authorized,
approved or ratified, by the board of directors, a committee,
or the members.
(b) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board
of directors or of a committee which authorizes the contract
or transaction.
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
2241
2242
2243
2244
2245
2246
2247
2248
2249
2250
2251
2252
2253
2254
2255
2256
2257
2258
2259
2260
2261
2262
2263
2264
2265
2266
2267
2268
HB248 Enrolled
Page 82
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
2269
2270
2271
2272
2273
2274
2275
2276
2277
2278
2279
2280
2281
2282
2283
2284
2285
2286
2287
2288
2289
2290
2291
2292
2293
2294
2295
2296
HB248 Enrolled
Page 83
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
2297
2298
2299
2300
2301
2302
2303
2304
2305
2306
2307
2308
2309
2310
2311
2312
2313
2314
2315
2316
2317
2318
2319
2320
2321
2322
2323
2324
HB248 Enrolled
Page 84
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
2325
2326
2327
2328
2329
2330
2331
2332
2333
2334
2335
2336
2337
2338
2339
2340
2341
2342
2343
2344
2345
2346
2347
2348
2349
2350
2351
2352
HB248 Enrolled
Page 85
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. "
"§10A-5A-4.09
Notwithstanding Sections 10A-1-3.32 and 10A-1-3.33:
2353
2354
2355
2356
2357
2358
2359
2360
2361
2362
2363
2364
2365
2366
2367
2368
2369
2370
2371
2372
2373
2374
2375
2376
2377
2378
2379
2380
HB248 Enrolled
Page 86
Notwithstanding Sections 10A-1-3.32 and 10A-1-3.33:
(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, are subject
to inspection and copying to inspect and copy for any proper
purpose by any the demanding member or the member's agent or
attorney during regular business hours. Subject to subsection
(g), any person with the authority to bind the limited
liability company under Section 10A-5A-3.02 and any person
with the authority to direct and oversee the activities and
affairs of a limited liability company who, without reasonable
2381
2382
2383
2384
2385
2386
2387
2388
2389
2390
2391
2392
2393
2394
2395
2396
2397
2398
2399
2400
2401
2402
2403
2404
2405
2406
2407
2408
HB248 Enrolled
Page 87
affairs 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
transferable interest of the member, in addition to any other
damages or remedy.
(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
2409
2410
2411
2412
2413
2414
2415
2416
2417
2418
2419
2420
2421
2422
2423
2424
2425
2426
2427
2428
2429
2430
2431
2432
2433
2434
2435
2436
HB248 Enrolled
Page 88
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.(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; and
b.(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
2437
2438
2439
2440
2441
2442
2443
2444
2445
2446
2447
2448
2449
2450
2451
2452
2453
2454
2455
2456
2457
2458
2459
2460
2461
2462
2463
2464
HB248 Enrolled
Page 89
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
2465
2466
2467
2468
2469
2470
2471
2472
2473
2474
2475
2476
2477
2478
2479
2480
2481
2482
2483
2484
2485
2486
2487
2488
2489
2490
2491
2492
HB248 Enrolled
Page 90
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
2493
2494
2495
2496
2497
2498
2499
2500
2501
2502
2503
2504
2505
2506
2507
2508
2509
2510
2511
2512
2513
2514
2515
2516
2517
2518
2519
2520
HB248 Enrolled
Page 91
of the records, the limited liability company shall have the
burden of demonstrating that the restrictions proposed by the
limited liability company were reasonable. "
"§10A-8A-4.10
(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
2521
2522
2523
2524
2525
2526
2527
2528
2529
2530
2531
2532
2533
2534
2535
2536
2537
2538
2539
2540
2541
2542
2543
2544
2545
2546
2547
2548
HB248 Enrolled
Page 92
(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
2549
2550
2551
2552
2553
2554
2555
2556
2557
2558
2559
2560
2561
2562
2563
2564
2565
2566
2567
2568
2569
2570
2571
2572
2573
2574
2575
2576
HB248 Enrolled
Page 93
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 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
2577
2578
2579
2580
2581
2582
2583
2584
2585
2586
2587
2588
2589
2590
2591
2592
2593
2594
2595
2596
2597
2598
2599
2600
2601
2602
2603
2604
HB248 Enrolled
Page 94
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) Any partner who, without reasonable cause, refuses
to allow any partner or person dissociated as a partner, or
his or her agent or attorney to inspect or copy any records of
the partnership to which such partner or person dissociated as
a partner is entitled under this section, shall be personally
liable to the partner or person dissociated as a partner for a
penalty in an amount not to exceed 10 percent of the fair
market value of the transferable interest of the partner or
person dissociated as a partner, in addition to any other
damages or remedy.
(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
2605
2606
2607
2608
2609
2610
2611
2612
2613
2614
2615
2616
2617
2618
2619
2620
2621
2622
2623
2624
2625
2626
2627
2628
2629
2630
2631
2632
HB248 Enrolled
Page 95
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. "
"§10A-8A-5.02
(a) A transfer, in whole or in part, of a partner's
transferable interest:
(1) is permissible;
2633
2634
2635
2636
2637
2638
2639
2640
2641
2642
2643
2644
2645
2646
2647
2648
2649
2650
2651
2652
2653
2654
2655
2656
2657
2658
2659
2660
HB248 Enrolled
Page 96
(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-5.05 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
2661
2662
2663
2664
2665
2666
2667
2668
2669
2670
2671
2672
2673
2674
2675
2676
2677
2678
2679
2680
2681
2682
2683
2684
2685
2686
2687
2688
HB248 Enrolled
Page 97
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
2689
2690
2691
2692
2693
2694
2695
2696
2697
2698
2699
2700
2701
2702
2703
2704
2705
2706
2707
2708
2709
2710
2711
2712
2713
2714
2715
2716
HB248 Enrolled
Page 98
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."
"§10A-9A-3.04
Notwithstanding the provisions of Sections 10A-1-3.32
and 10A-1-3.33:
(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 required
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. The limited
partner need not have any particular purpose for seeking the
information.
(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 as is just and reasonable if:
(1) the limited partner seeks the information for a
proper purpose reasonably 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
2717
2718
2719
2720
2721
2722
2723
2724
2725
2726
2727
2728
2729
2730
2731
2732
2733
2734
2735
2736
2737
2738
2739
2740
2741
2742
2743
2744
HB248 Enrolled
Page 99
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 required 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
2745
2746
2747
2748
2749
2750
2751
2752
2753
2754
2755
2756
2757
2758
2759
2760
2761
2762
2763
2764
2765
2766
2767
2768
2769
2770
2771
2772
HB248 Enrolled
Page 100
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; 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 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. Any general partner, or
2773
2774
2775
2776
2777
2778
2779
2780
2781
2782
2783
2784
2785
2786
2787
2788
2789
2790
2791
2792
2793
2794
2795
2796
2797
2798
2799
2800
HB248 Enrolled
Page 101
the burden of proving reasonableness. Any general partner, or
any agent, officer or employee of a general partner or any
agent of a limited partnership, who, without reasonable cause,
refuses to allow any limited partner or the limited partner's
agent or attorney to inspect or copy any information of the
limited partnership to which such limited partner is entitled
under subsection (a) or (b) shall be personally liable to the
limited partner for a penalty in an amount not to exceed ten
percent of the fair market value of the limited partnership
interest of the limited partner in addition to any other
damages or remedy.
(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.
2801
2802
2803
2804
2805
2806
2807
2808
2809
2810
2811
2812
2813
2814
2815
2816
2817
2818
2819
2820
2821
2822
2823
2824
2825
2826
2827
2828
HB248 Enrolled
Page 102
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
2829
2830
2831
2832
2833
2834
2835
2836
2837
2838
2839
2840
2841
2842
2843
2844
2845
2846
2847
2848
2849
2850
2851
2852
2853
2854
2855
2856
HB248 Enrolled
Page 103
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. "
"§10A-17-1.02
In this chapter:
(1) "Member" MEMBER means a person who, under the rules
2857
2858
2859
2860
2861
2862
2863
2864
2865
2866
2867
2868
2869
2870
2871
2872
2873
2874
2875
2876
2877
2878
2879
2880
2881
2882
2883
2884
HB248 Enrolled
Page 104
(1) "Member" 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" 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" NONPROFIT PURPOSE shall be any
purpose for which a nonprofit corporation could be organized
under the Alabama Nonprofit Corporation Act Law, as amended,
and where no part of income or profit is distributable to its
members, directors , and officers."
Section 2. Division G, consisting of Section
10A-2A-8.70, is added to Article 8 of Chapter 2A of Title 10A
of the Code of Alabama 1975, to read as follows:
Division G Corporate Opportunities.
§10A-2A-8.70 Corporate opportunities.
(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
2885
2886
2887
2888
2889
2890
2891
2892
2893
2894
2895
2896
2897
2898
2899
2900
2901
2902
2903
2904
2905
2906
2907
2908
2909
2910
2911
2912
HB248 Enrolled
Page 105
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
2913
2914
2915
2916
2917
2918
2919
2920
2921
2922
2923
2924
2925
2926
2927
2928
2929
2930
2931
2932
2933
2934
2935
2936
2937
2938
2939
2940
HB248 Enrolled
Page 106
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.
Section 3. Sections 10A-3A-6.14, 10A-3A-8.61, and
10A-3A-8.62 are added to the Code of Alabama 1975, to read as
follows:
§10A-3A-6.14 No derivative actions in nonprofit
corporations.
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.
§10A-3A-8.61 Acts or transactions involving a
membership nonprofit corporation.
(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
2941
2942
2943
2944
2945
2946
2947
2948
2949
2950
2951
2952
2953
2954
2955
2956
2957
2958
2959
2960
2961
2962
2963
2964
2965
2966
2967
2968
HB248 Enrolled
Page 107
(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
2969
2970
2971
2972
2973
2974
2975
2976
2977
2978
2979
2980
2981
2982
2983
2984
2985
2986
2987
2988
2989
2990
2991
2992
2993
2994
2995
2996
HB248 Enrolled
Page 108
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
2997
2998
2999
3000
3001
3002
3003
3004
3005
3006
3007
3008
3009
3010
3011
3012
3013
3014
3015
3016
3017
3018
3019
3020
3021
3022
3023
3024
HB248 Enrolled
Page 109
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
3025
3026
3027
3028
3029
3030
3031
3032
3033
3034
3035
3036
3037
3038
3039
3040
3041
3042
3043
3044
3045
3046
3047
3048
3049
3050
3051
3052
HB248 Enrolled
Page 110
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
3053
3054
3055
3056
3057
3058
3059
3060
3061
3062
3063
3064
3065
3066
3067
3068
3069
3070
3071
3072
3073
3074
3075
3076
3077
3078
3079
3080
HB248 Enrolled
Page 111
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
3081
3082
3083
3084
3085
3086
3087
3088
3089
3090
3091
3092
3093
3094
3095
3096
3097
3098
3099
3100
3101
3102
3103
3104
3105
3106
3107
3108
HB248 Enrolled
Page 112
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.
§10A-3A-8.62 Acts or transactions involving a
nonmembership nonprofit corporation.
(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
3109
3110
3111
3112
3113
3114
3115
3116
3117
3118
3119
3120
3121
3122
3123
3124
3125
3126
3127
3128
3129
3130
3131
3132
3133
3134
3135
3136
HB248 Enrolled
Page 113
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,
3137
3138
3139
3140
3141
3142
3143
3144
3145
3146
3147
3148
3149
3150
3151
3152
3153
3154
3155
3156
3157
3158
3159
3160
3161
3162
3163
3164
HB248 Enrolled
Page 114
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
3165
3166
3167
3168
3169
3170
3171
3172
3173
3174
3175
3176
3177
3178
3179
3180
3181
3182
3183
3184
3185
3186
3187
3188
3189
3190
3191
3192
HB248 Enrolled
Page 115
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
3193
3194
3195
3196
3197
3198
3199
3200
3201
3202
3203
3204
3205
3206
3207
3208
3209
3210
3211
3212
3213
3214
3215
3216
3217
3218
3219
3220
HB248 Enrolled
Page 116
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.
Section 4. Division G, consisting of Section
10A-3A-8.70, is added to Article 8 of Chapter 3A of Title 10A
of the Code of Alabama 1975, to read as follows:
Division G Corporate Opportunities.
§10A-3A-8.70 Corporate opportunities.
(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
3221
3222
3223
3224
3225
3226
3227
3228
3229
3230
3231
3232
3233
3234
3235
3236
3237
3238
3239
3240
3241
3242
3243
3244
3245
3246
3247
3248
HB248 Enrolled
Page 117
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
3249
3250
3251
3252
3253
3254
3255
3256
3257
3258
3259
3260
3261
3262
3263
3264
3265
3266
3267
3268
3269
3270
3271
3272
3273
3274
3275
3276
HB248 Enrolled
Page 118
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.
Section 5. Sections 10A-2A-16.10 and 10A-3A-4.20, Code
of Alabama 1975, providing for financial statements for
stockholders and members respectively, are repealed. The
provisions of Section 10A-2A-16.10 are incorporated into
Sections 10A-2A-16.02, 10A-2A-16.03, and 10A-2A-16.04, Code of
Alabama 1975, and the provisions of Section 10A-3A-4.20 are
incorporated into Sections 10A-3A-4.02, 10A-3A-4.03, and
10A-3A-4.04, Code of Alabama 1975.
Section 6. No amendment made by this act shall apply to
or affect any civil action or proceeding completed or pending
on or before August 1, 2026.
Section 7. A nonprofit corporation governed by Chapter
3A of Title 10A, Code of Alabama 1975, 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, Code of Alabama 1975,
made by Act 2026-___." The election may be revoked by the
nonprofit corporation at any time thereafter by an amendment
to the certificate of incorporation which removes that
3277
3278
3279
3280
3281
3282
3283
3284
3285
3286
3287
3288
3289
3290
3291
3292
3293
3294
3295
3296
3297
3298
3299
3300
3301
3302
3303
3304
HB248 Enrolled
Page 119
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 Chapter 3A of Title 10A, Code of Alabama 1975, or any
successor law, as in effect as of the date of that amendment,
and as amended or replaced thereafter.
Section 8. This act shall become effective on August 1,
2026.
3305
3306
3307
3308
3309
3310
3311
HB248 Enrolled
Page 120
2026.
________________________________________________
Speaker of the House of Representatives
________________________________________________
President and Presiding Officer of the Senate
House of Representatives
I hereby certify that the within Act originated in and
was passed by the House 31-Mar-26.
John Treadwell
Clerk
Senate 08-Apr-26 Amended and Passed
House 09-Apr-26 Concurred in Senate
Amendment
3312
3313
3314
3315
3316
3317
3318
3319
3320
3321
3322
3323
3324
3325
3326
3327
3328
3329
3330
3331
3332
3333
3334
3335
3336
3337
3338
3339
3340
3341
3342
3343
3344
3345
3346