Directors.

Ala. Code tit. 10A, ch. 3A, art. 8, div. C

in effect

Ala. Code § 10A-3A-8.30 Standards of Conduct for Directors.

10A-3A-8.30. Standards of Conduct for Directors. Division C of Article 3 of Chapter 1 shall not apply to this chapter. Instead: (a) Each member of the board of directors, when discharging the duties of a director, shall act: (i) in good faith, and (ii) in a manner the director reasonably believes to be in the best interests of the nonprofit corporation. (b) The members of the board of directors or a board committee, when becoming informed in connection with their decision-making function or devoting attention to their oversight function, shall discharge their duties with the care that a person in a like position would reasonably believe appropriate under similar circumstances. (c) In discharging board of directors or board committee duties, a director shall disclose, or cause to be disclosed, to the other board of directors or board committee members information not already known by them but known by the director to be material to the discharge of their decision-making or oversight functions, except that disclosure is not required to the extent that the director reasonably believes that doing so would violate a duty imposed under law, a legally enforceable obligation of confidentiality, or a professional ethics rule. (d) In discharging board of directors or board committee duties, a director who does not have knowledge that makes reliance unwarranted is entitled to rely on the performance by any of the persons specified in subsection (f)(1) or subsection (f)(3) to whom the board of directors may have delegated, formally or informally by course of conduct, the authority or duty to perform one or more of the board of directors’ functions that are delegable under applicable law. (e) In discharging board of directors or board committee duties, a director who does not have knowledge that makes reliance unwarranted is entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, prepared or presented by any of the persons specified in subsection (f). (f) A director is entitled to rely, in accordance with subsection (d) or (e), on: (1) one or more officers, employees, or volunteers of the nonprofit corporation or one or more persons associated with the nonprofit corporation, whom the director reasonably believes to be reliable and competent in the functions performed or the information, opinions, reports, or statements provided; (2) legal counsel, public accountants, or other persons retained by the nonprofit corporation as to matters involving skills or expertise the director reasonably believes are matters (i) within the particular person’s professional or expert competence, or (ii) as to which the particular person merits confidence; or (3) a board committee of which the director is not a member if the director reasonably believes the committee merits confidence. (g) Except as set forth in subsections (a) and (b), a director, when discharging the duties of a director, has no duty to any person other than the nonprofit corporation. EndFragment (Act 2023-503, §1.)

Ala. Code § 10A-3A-8.31 Standards of Liability for Directors.

10A-3A-8.31. Standards of Liability for Directors. Division C of Article 3 of Chapter 1 shall not apply to this chapter. Instead: (a) A director shall not be liable to the nonprofit corporation or its members for any decision to take or not to take action, or any failure to take any action, as a director, unless the party asserting liability in a proceeding establishes that: (1) no defense interposed by the director based on: (i) any provision in the certificate of incorporation authorized by Section 10A-3A-2.02(b)(4) or by Section 10A-3A-2.02(b)(6), or (ii) the protection afforded by Section 10A-3A-8.60, precludes liability; and (2) the challenged conduct consisted or was the result of: (i) action not in good faith; or (ii) a decision: (A) which the director did not reasonably believe to be in the best interests of the nonprofit corporation, or (B) as to which the director was not informed to an extent the director reasonably believed appropriate in the circumstances; or (iii) a lack of objectivity due to the director’s familial, financial or business relationship with, or a lack of independence due to the director’s domination or control by, another person having a material interest in the challenged conduct: (A) which relationship or which domination or control could reasonably be expected to have affected the director’s judgment respecting the challenged conduct in a manner adverse to the nonprofit corporation, and (B) after a reasonable expectation to that effect has been established, the director shall not have established that the challenged conduct was reasonably believed by the director to be in the best interests of the nonprofit corporation; or (iv) a sustained failure of the director to devote attention to ongoing oversight of the activities and affairs of the nonprofit corporation, or a failure to devote timely attention, by making (or causing to be made) appropriate inquiry, when particular facts and circumstances of significant concern materialize that would alert a reasonably attentive director to the need for that inquiry; or (v) receipt of a financial benefit to which the director was not entitled or any other breach of the director’s duties to deal fairly with the nonprofit corporation and its members that is actionable under applicable law. (b) The party seeking to hold the director liable: (1) for money damages, shall also have the burden of establishing that: (i) harm to the nonprofit corporation or its members has been suffered, and (ii) the harm suffered was proximately caused by the director’s challenged conduct; or (2) for other money payment under a legal remedy, such as compensation for the unauthorized use of corporate assets, shall also have whatever persuasion burden may be called for to establish that the payment sought is appropriate in the circumstances; or (3) for other money payment under an equitable remedy, such as profit recovery by or disgorgement to the nonprofit corporation, shall also have whatever persuasion burden may be called for to establish that the equitable remedy sought is appropriate in the circumstances. (c) Nothing contained in this section shall: (1) in any instance where fairness is at issue alter the burden of proving the fact or lack of fairness otherwise applicable; (2) alter the fact or lack of liability of a director under another section of this chapter, such as the provisions governing the consequences of an unlawful distribution under Section 10A-3A-8.32 or a transactional interest under Section 10A-3A-8.60; (3) affect any rights to which a director may be entitled under another statute of this state or the United States; or (4) affect any rights to which the nonprofit corporation or a member may be entitled under another statute of this state or the United States. EndFragment (Act 2023-503, §1.)

Ala. Code § 10A-3A-8.32 Directors’ Liability for Unlawful Distributions.

10A-3A-8.32. Directors’ Liability for Unlawful Distributions. (a) A director who votes for or assents to a distribution in excess of what may be authorized and made pursuant to Section 10A-3A-6.40 or Section 10A-3A-11.07 is personally liable to the nonprofit corporation for the amount of the distribution that exceeds what could have been distributed without violating Section 10A-3A-6.40 or Section 10A-3A-11.07 if the party asserting liability establishes that when taking the action the director did not comply with Section 10A-3A-8.30. (b) A director held liable under subsection (a) for an unlawful distribution is entitled to: (1) contribution from every other director who could be held liable under subsection (a) for the unlawful distribution; and (2) recoupment from each person of the pro-rata portion of the amount of the unlawful distribution the person received, whether or not the person knew the distribution was made in violation of Section 10A-3A-6.40 or Section 10A-3A-11.07. (c) A proceeding to enforce: (1) the liability of a director under subsection (a) is barred unless it is commenced within two years after the date on which the distribution was made; or (2) contribution or recoupment under subsection (b) is barred unless it is commenced within one year after the liability of the claimant has been finally adjudicated under subsection (a). EndFragment (Act 2023-503, §1.)

Ala. Code § 10A-3A-8.33 Loans to or Guarantees for Directors and Officers.

10A-3A-8.33. Loans to or Guarantees for Directors and Officers. (a) A nonprofit corporation may not lend money to or guarantee the obligation of a director or officer of the nonprofit corporation. (b) The fact that a loan or guarantee is made in violation of this section does not affect the borrower’s liability on the loan. EndFragment (Act 2023-503, §1.)

Source: Alabama Legislature (alison.legislature.state.al.us)URL: https://alison.legislature.state.al.us/code-of-alabamaFetched: 10/20/2026