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AlabamaHB2002025 Regular SessionHouse

Alabama Business and Nonprofit Entity Code revised; makes technical changes and corrects references, and codifies practices relating to electronic filing and name reservations

Sponsored By: Almond

Enacted

Businesses & Financial Institutions

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Bill Overview

Analyzed Economic Effects

14 provisions identified: 6 benefits, 1 costs, 7 mixed.

Business agreements can direct inheritance transfers

LLC, partnership, and limited partnership agreements can direct all or part of a holder’s transferable interest to others at death. Recipients can receive the interest with or without payment, but the agreement must provide for the transfer. Existing charging orders—court orders allowing creditors to collect from the interest—remain in place. Creditors’ rights against recipients also remain protected.

Deferred pay remains available after ownership

LLCs and limited liability partnerships can still pay pensions or other deferred compensation for former members’ or partners’ past services. Other laws continue to apply. These provisions do not create a new right to payment or set an amount. The partnership rule also does not excuse an existing payment obligation.

Business and nonprofit boards gain approval flexibility

Beginning August 1, 2025, business and nonprofit boards can approve required documents in final or nearly final form. All important terms must be included or determinable from information presented to or known by the board. Boards can later formally confirm their actions, with legal effect from the original action date. That confirmation can satisfy requirements about the manner or order of approval.

Businesses need fewer transaction plan attachments

Beginning August 1, 2025, covered merger, stock exchange, and conversion plans need not include certain disclosure letters, schedules, or similar papers when approved. This applies to papers that add to, qualify, or create exceptions to the plan’s promises and conditions. Partnership and limited partnership merger plans otherwise include related documents that state the merger’s terms, subject to the disclosure exception. The attachment rule does not mean those related documents no longer matter to the deal.

Clearer operating rules for Alabama businesses

Since August 1, 2025, general entity rules cover Chapters 2A–11, 17, and 18, including statewide trade associations. The Code’s exceptions and rules for resolving conflicts still apply. Alabama entities can make lawful payments, donations, and other business-related decisions, subject to the Code and their governing documents. An LLC action valid under one rule stays valid despite failing requirements of a different rule for a similar action.

Valid business and nonprofit actions stay valid

Beginning August 1, 2025, the law protects valid actions by partnerships, limited partnerships, business corporations, and nonprofit corporations. An action properly taken under one rule stays valid even when a similar rule has different requirements. Failing to meet that other rule’s requirements alone does not invalidate the action. The action must still meet the requirements of the rule actually used.

Businesses must reserve names before filing

Beginning August 1, 2025, filing entities must reserve a name with Alabama’s Secretary of State before filing formation papers. General partnerships must also reserve names when filing partnership, not-for-profit partnership, or limited liability partnership statements. They must attach the reservation certificate, though it is not part of the filing document itself. Entities formed outside Alabama must also reserve names and attach certificates when applying to register in Alabama. These provisions state no fee amount.

Court remedies for professional business buyouts

Estate representatives, disqualified owners, and transferees can seek judgments for professional corporation stock’s fair value. In covered professional corporation, LLC, and limited liability partnership valuation cases, the business generally pays court and court-appointed appraiser costs. Courts can order installment payments with interest running from the event that triggered the buyout. Courts can shift costs or reasonable expenses for arbitrary, abusive, or bad-faith conduct, as each entity’s rules allow. They can also charge the business reasonable proceeding expenses for substantially failing to follow the buyout rules.

Professional stock rights end after delays

A professional corporation must cancel stock if its purchase, redemption, or transfer remains unfinished 12 months after death, disqualification, or transfer. The estate representative, disqualified person, or transferee loses stockholder rights but keeps the right to payment. The corporation can require a disqualified owner to sell stock to it. It does not have to buy the stock when disqualification lasts less than 12 months.

Business agents face clearer filing rules

Agent-filed name or registered-office address changes must list each business’s state-assigned number and confirm written notice at least 10 days before filing. One statement can cover several businesses if it lists each number. An agent can resign even when a business is not in good standing, after notifying it and filing the required statement. Resignation takes effect at 12:01 a.m. on day 31 after delivery, or sooner when the business names a replacement. The former agent then has no statutory duty for later matters sent to it, while contractual rights remain unchanged.

Deadlines for professional business owner buyouts

Covered professional corporations, professional-service LLCs, and professional limited liability partnerships must buy interests that cannot pass to qualified owners. When governing documents or an applicable agreement do not set the price, a written fair-value offer is required. Offers are due within six months after death or 30 days after disqualification or transfer to a disqualified person. Offers must include a balance sheet dated within the prior 12 months and a profit-and-loss statement covering the prior 12 months. Agreement within 30 days after the offer triggers payment within 90 days, unless another payment period is agreed. Either side can seek court valuation after 30 days without agreement; affected holders or estate representatives can sue if no required offer arrives.

Merger plans can require failure payments

Covered merger plans can set penalties or payments when parties fail to meet pre-merger duties or complete the merger. Payments can cover lost premiums or other economic rights, and an entitled business can enforce and keep them. These consequences must appear in the plan and supplement other legal remedies; the general permission excludes nonprofit entities. Beginning August 1, 2025, the limited partnership amendment also covers earlier plans and contracts. It does not affect civil actions or proceedings completed or pending on or before that date.

Merger representatives can bind business owners

Merger plans can appoint representatives with sole authority to act for owners, including enforcing or settling their rights. This can include owners whose interests are cancelled, exchanged, or changed in the merger. After the required owner vote, covered appointments bind all owners and can be irrevocable; plans can also restrict later changes. The limited partnership amendment reaches earlier covered plans and contracts beginning August 1, 2025. It does not affect civil actions or proceedings completed or pending on or before that date.

Merger representatives can bind business owners

Beginning August 1, 2025, merger plans can appoint representatives to act for an organization’s owners. The plan can give them sole authority to enforce or settle owners’ rights under the plan. Appointments can be made at or after owners approve the plan by the required vote. The plan can make appointments binding on all owners and impossible to revoke, and limit later changes to those terms.

Sponsors & Cosponsors

Sponsor

  • Almond

    Affiliation unavailable

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 404 • No: 0

House vote • 4/24/2025

Almond Concur In and Adopt - Adopted Roll Call 1015

Yes: 102 • No: 0 • Other: 1

Senate vote • 4/8/2025

Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 542

Yes: 33 • No: 0

Senate vote • 4/8/2025

Singleton motion to Adopt - Adopted Roll Call 541

Yes: 33 • No: 0

Senate vote • 4/8/2025

Third Reading in Second House

Yes: 33 • No: 0

House vote • 2/20/2025

Motion to Read a Third Time and Pass - Adopted Roll Call 183

Yes: 101 • No: 0

House vote • 2/20/2025

Third Reading in House of Origin

Yes: 102 • No: 0 • Other: 1

Actions Timeline

  1. Enacted

    5/6/2025House

  2. Delivered to Governor

    4/29/2025House

  3. Signature Requested

    4/29/2025Senate

  4. Almond Concur In and Adopt - Adopted Roll Call 1015

    4/24/2025House

  5. Ready to Enroll

    4/24/2025House

  6. Enrolled

    4/24/2025House

  7. Third Reading in Second House

    4/8/2025Senate

  8. Judiciary 1st Amendment Offered

    4/8/2025Senate

  9. Singleton motion to Adopt - Adopted Roll Call 541

    4/8/2025Senate

  10. Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 542

    4/8/2025Senate

  11. Judiciary 1st Amendment

    3/5/2025Senate

  12. Reported Out of Committee Second House

    3/5/2025Senate

  13. Read for the Second Time and placed on the Calendar

    3/5/2025Senate

  14. Read for the first time and referred to the Senate Committee on Judiciary

    2/25/2025Senate

  15. Pending Committee Action in Second House

    2/25/2025Senate

  16. Third Reading in House of Origin

    2/20/2025House

  17. Motion to Read a Third Time and Pass - Adopted Roll Call 183

    2/20/2025House

  18. Reported Out of Committee House of Origin

    2/12/2025House

  19. Read for the Second Time and placed on the Calendar

    2/12/2025House

  20. Read for the first time and referred to the House Committee on Judiciary

    2/5/2025House

  21. Pending Committee Action in House of Origin

    2/5/2025House

Bill Text

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