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AlabamaHB2482026 Regular SessionHouse

Alabama Business and Nonprofit Entities Code; revisions made to clarify procedures, make technical corrections, and codify common law

Sponsored By: David Faulkner (Republican)

Enacted

Businesses & Financial Institutions

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Bill Overview

Analyzed Economic Effects

28 provisions identified: 9 benefits, 6 costs, 13 mixed.

Nonprofit members can recover inspection costs

Beginning August 1, 2026, membership nonprofits generally pay members’ expenses for obtaining court orders to inspect and copy specified records. A nonprofit avoids payment by proving a good-faith refusal based on reasonable doubt about the member’s inspection right. It can also avoid payment when a member rejects reasonable limits on confidentiality, use, or distribution. The nonprofit must prove that any proposed limits used to justify refusal were reasonable.

Stockholders can gain election cost support

Corporate bylaws can require company voting materials to include stockholder-nominated director candidates. Bylaws can also provide repayment of stockholders’ costs for seeking other stockholders’ votes. Companies can set ownership, disclosure, eligibility, voting-support, and other lawful conditions. These provisions cannot apply to elections whose record date came before adoption.

Stockholders gain flexible ways to inspect

Eligible stockholders can appoint an agent or attorney to inspect records by including written authorization with their demand. Corporations can provide requested financial statements through a website, another accepted method, or a method allowed by federal securities rules. They must provide statements prepared under generally accepted accounting principles for the requested period. An accountant’s report must accompany annual statements that the accountant audited or otherwise reported on.

Corrected business filings protect prior reliance

Corrected or canceled business filings generally take effect on the original document’s effective date. A later date protects people who relied on the original filing and are harmed by the change. For those people, the change takes effect when the correction or cancellation certificate is filed.

Partners gain transfer-at-death planning options

Partnership agreements can require or allow all or part of a transferable interest to pass to others at death. The transfer can occur with or without payment. Any outstanding charging order—a court-ordered creditor claim against the interest—still applies after transfer.

Existing cases keep prior entity rules

The act takes effect August 1, 2026. Its changes do not affect civil actions or proceedings completed or pending on or before that date. Eligible nonprofits already governed by Chapter 3A around July/August 2026 can elect to keep the prior chapter rules. The election deadline is December 31, 2026, and the nonprofit can later revoke its election.

Existing nonprofits can keep prior rules

The law takes effect August 1, 2026, without affecting proceedings completed or pending on or before that date. Nonprofits already governed by Chapter 3A and existing before August 1, 2026, can choose to keep its prior rules. They must amend their charter by December 31, 2026, to make that choice. They can later remove that charter provision, after which current law applies.

Corporate boards get simpler approval paperwork

Business and nonprofit boards can approve documents without attaching related disclosure letters, schedules, or similar materials. This applies when the relevant corporate law expressly requires board approval or action. Business corporate boards can also ratify previously approved documents. That ratification takes effect as of the original board action.

Officer opportunity waivers need board approval

A corporate charter can limit or remove an officer’s duty to offer business opportunities to the corporation. Applying that provision to an officer requires later approval from qualified directors through the required process. The same safeguard covers specified relatives, household members, related entities, and fiduciary relationships.

Investors must prove ownership for records

Beginning August 1, 2026, investors not listed as record stockholders must provide ownership proof to inspect corporate records. Their demand must identify them as beneficial stockholders or unrestricted voting trust beneficial owners. They must provide documents proving that status and confirm that the documents are true and correct copies.

Reporting companies lose state inspection duties

Stockholders lose the state-law inspection and copying process for qualifying federally reporting corporations. The corporation must have faced Exchange Act section 13 or 15(d) reporting requirements for at least the preceding 12 months. It must also have filed all required reports. Federal duties to provide stockholder information remain.

Stockholders face tighter records access rules

Stockholders must submit signed requests at least five business days ahead, explaining a good-faith ownership-related purpose and the records needed. Owners not listed in corporate records must supply additional required information. Corporations may reject requests tied to opposing lawsuits, redact unrelated details, and require reasonable confidentiality and use protections. They may deny inspection after misuse of information from an earlier inspection within the past two years. They may withhold stockholder lists after unauthorized list sales, offers, or help with either during that same two-year period.

Stockholders lose oppressive-conduct dissolution grounds

Stockholders can no longer seek court-ordered dissolution based on oppressive conduct by corporate directors or controllers. The listed ground still allows dissolution for conduct that was, is, or will be illegal or fraudulent.

Business agents need more than virtual offices

Registered agents for covered Alabama entities cannot work solely through virtual offices, mail-forwarding services, or both. Covered entities must continuously maintain an Alabama registered agent and a physical street address for legal service. These rules also cover registered foreign entities and specified general partnerships.

Nonprofits lose lawsuits brought on their behalf

Beginning August 1, 2026, the amended nonprofit rules bar derivative lawsuits. These are lawsuits people bring on a nonprofit’s behalf to enforce rights belonging to the nonprofit. The act does not affect proceedings completed or pending on or before August 1, 2026.

Corporate lawsuits get court and fee limits

Business corporations and nonprofits can name courts for covered corporate claims, narrowing where claimants can sue. Selected courts outside Alabama need a reasonable connection to the corporation. At least one Alabama court with jurisdiction must remain available for covered claims. Internal corporate claims cannot be forced into arbitration or blocked from Alabama courts. Business corporate charters cannot make stockholders pay the corporation’s or another party’s legal fees for covered stockholder claims.

Nonprofit members get statements with limits

Eligible nonprofit members can receive requested financial statements through a website or another accepted method. Prepared statements using generally accepted accounting principles, and accountant reports on annual statements, must be made available. Members must give signed notice at least five business days ahead and explain a purpose directly tied to their membership interest. Nonprofits may reject demands tied to opposing civil lawsuits and redact unrelated details. They may withhold membership lists after prohibited use, or deny inspection after misuse of previously obtained information within two years.

Owners gain expense recovery, lose penalties

Eligible company and partnership owners can seek expedited court orders when proper inspection demands are not honored within a reasonable time. After covered court-ordered inspections, corporations, limited liability companies, and partnerships generally must pay the requester’s expenses. They can avoid payment by proving good-faith doubt about inspection rights or the requester’s rejection of reasonable confidentiality or use restrictions. A corporation relying on proposed restrictions must prove those restrictions were reasonable. The law removes separate refusal penalties of up to 10 percent of share value, ownership-interest value, or transferable-interest value, as applicable.

Businesses can fix flawed official filings

Beginning August 1, 2026, entities can correct or cancel filed documents containing errors or signing defects. An authorized person must submit a signed certificate identifying the problem and stating the correction or cancellation. The certificate takes effect upon filing and cannot have a delayed effective date. Corrections and cancellations apply back to the original filing date, subject to protections for people who relied on the filing.

Company members face records notice deadlines

Limited liability company members must give 10 days’ written notice for required records, or 30 days for other books and records. Required records include member addresses, formation documents, the operating agreement, and three years of tax records and financial statements. Other-record requests need an ownership-related proper purpose; demands tied to specified opposing lawsuits do not qualify. Companies may redact unrelated details or deny access after misuse of previously obtained information within two years. Authorized agents need written permission, and former members retain access only to relevant records from their membership period.

Entity owners get access with safeguards

Owners and members under the general entity rules must give signed notice at least 10 business days before inspection. Their demand must explain a good-faith ownership-related purpose and identify records directly related to it. Entities may redact unrelated details, require reasonable confidentiality protections, or deny access after misuse within the preceding two years. Qualifying former owners retain access to records from their ownership period, and requesters can seek expedited court review. Entity types with separate inspection laws, including statewide trade associations, follow those laws instead.

Partners face purpose-based records access limits

Partnerships may redact record details unrelated to the requester’s purpose; agents and attorneys need written authorization to inspect. Limited partners must explain their ownership-related purpose and requested information in a detailed written demand. Qualifying former limited partners can inspect relevant records from their partnership period, acting in good faith. Limited partnerships may reject demands tied to specified pending or expected opposing lawsuits.

Nonprofit leaders gain protections with safeguards

Beginning August 1, 2026, nonprofit directors and officers gain protection from conflict-transaction claims after disclosed qualified-director or eligible-member approval, or fairness. Transactions involving controlling persons receive similar protections; charter-granted approval authority still requires that person’s approval. Directors and officers can pursue opportunities after disclosing all known material facts and obtaining an authorized nonprofit disclaimer before becoming legally bound. A charter can also limit or remove the duty to offer opportunities, reducing the nonprofit’s ability to claim them. Skipping the disclaimer process alone does not prove a breach or change the burden of proof.

Company leaders gain business opportunity protections

Beginning August 1, 2026, directors and officers gain protection from corporate claims for taking a business opportunity themselves. Before becoming legally bound, they must disclose all known material facts and obtain a proper corporate decision declining the opportunity. Qualified directors or stockholders must make that decision through the required procedures. Protection also applies when the company’s charter limits or removes the duty to offer the opportunity. Skipping these procedures alone does not prove wrongdoing or change who must prove the claim.

Controlling stockholders gain protections with limits

Stockholders generally can vote in their own interest and owe no duties solely because they own stock. The personal-interest voting rule excludes controlling stockholders and control groups in controlling-stockholder transactions. Controllers must not intentionally use undue influence that causes a qualifying officer or director breach during transaction review. Statutory approval creates a presumption against a controller’s breach; damages require overcoming that presumption and proving the breach. Directors with material ties to involved stockholders cannot qualify for the specified review of controlling-stockholder or going-private deals.

Corporate insiders gain conditional lawsuit protections

Beginning August 1, 2026, the law limits specified claims over corporate transactions involving directors, officers, or controlling owners. A director’s or officer’s interest alone cannot support sanctions when the deal is not a conflicting-interest transaction. For conflicting-interest deals, protection requires informed approval by qualified directors, approval by qualified shares, or fairness to the corporation. Director approval requires a majority of qualified directors voting, with at least two affirmative votes, including through a qualified-director committee. Qualified shares must approve by a majority of votes cast after required notice and information. Controlling-owner deals have separate protection through qualified-director approval or recommendation, informed disinterested-stockholder approval, or fairness. The director route requires disclosure or knowledge of material facts and the controlling owner’s interest, plus the same majority-and-two-vote minimum. The stockholder route requires the deal to be conditioned on approval or ratification and an informed, uncoerced majority of votes cast. Going-private deals require both approval routes or fairness to the corporation at the relevant time.

Corporate officers get time-limited liability shields

Corporate charters can limit liability for specified senior officers and other officers designated by board resolution. These limits do not cover acts or omissions before the charter provision takes effect. Ending an officer’s designation applies only going forward. Later amendment or repeal generally leaves earlier acts unchanged, unless the charter provided otherwise when those acts occurred.

Alabama entities get clearer governance rules

Alabama law governs domestic entities’ formation and internal affairs, including owner and officer rights, duties, and liabilities. Officials can consider other states’ laws but do not breach a duty by declining to do so. The general disinterested-person standard does not apply to entities governed by Chapters 2A, 3A, 4, and 11. Written agreements can also remove that standard for entities governed by Chapters 5A, 8A, and 9A.

Sponsors & Cosponsors

Sponsor

  • David Faulkner

    Republican • House

Cosponsors

There are no cosponsors for this bill.

Roll Call Votes

All Roll Calls

Yes: 460 • No: 0

House vote • 4/9/2026

Faulkner motion to Concur In and Adopt Senate Amendment - Adopted Roll Call 1342

Yes: 104 • No: 0

Senate vote • 4/8/2026

Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 1273

Yes: 30 • No: 0

Senate vote • 4/8/2026

Givhan motion to Adopt - Adopted Roll Call 1272

Yes: 30 • No: 0

House vote • 3/31/2026

Third Reading in House of Origin

Yes: 98 • No: 0 • Other: 4

House vote • 3/31/2026

Motion to Adopt - Adopted Roll Call 1082

Yes: 96 • No: 0 • Other: 2

House vote • 3/31/2026

Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 1083

Yes: 102 • No: 0 • Other: 1

Actions Timeline

  1. Enacted

    4/15/2026House

  2. Faulkner motion to Concur In and Adopt Senate Amendment - Adopted Roll Call 1342

    4/9/2026House

  3. Ready to Enroll

    4/9/2026House

  4. Enrolled

    4/9/2026House

  5. Signature Requested

    4/9/2026Senate

  6. Delivered to Governor

    4/9/2026House

  7. Fiscal Responsibility and Economic Development 1st Amendment Offered

    4/8/2026Senate

  8. Givhan motion to Adopt - Adopted Roll Call 1272

    4/8/2026Senate

  9. Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 1273

    4/8/2026Senate

  10. Reported Out of Committee Second House

    4/7/2026Senate

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

    4/7/2026Senate

  12. Read for the first time and referred to the Senate Committee on Fiscal Responsibility and Economic Development

    4/1/2026Senate

  13. Pending Committee Action in Second House

    4/1/2026Senate

  14. Third Reading in House of Origin

    3/31/2026House

  15. Judiciary Engrossed Substitute Offered

    3/31/2026House

  16. Motion to Adopt - Adopted Roll Call 1082

    3/31/2026House

  17. Motion to Read a Third Time and Pass as Amended - Adopted Roll Call 1083

    3/31/2026House

  18. Engrossed

    3/31/2026House

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

    3/19/2026House

  20. Reported Out of Committee House of Origin

    3/18/2026House

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

    1/15/2026House

  22. Pending Committee Action in House of Origin

    1/15/2026House

Bill Text

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