Disposition of Assets.

Ala. Code tit. 10A, ch. 3A, art. 10

in effect

Ala. Code § 10A-3A-10.01 Disposition of Assets Not Requiring Member Approval in Membership Nonprofit Corporation.

10A-3A-10.01. Disposition of Assets Not Requiring Member Approval in Membership Nonprofit Corporation. In a membership nonprofit corporation: (a) No approval of the members or any person or group of persons specified in the certificate of incorporation is required, unless the certificate of incorporation otherwise provides: (1) to sell, lease, exchange, or otherwise dispose of any or all of the membership nonprofit corporation’s assets in the usual and regular course of the membership nonprofit corporation’s activities; (2) to mortgage, pledge, dedicate to the repayment of indebtedness (whether with or without recourse), or otherwise encumber any or all of the membership nonprofit corporation’s assets, regardless of whether in the usual and regular course of its activities; or (3) to transfer any or all of the membership nonprofit corporation’s assets to one or more corporations or other entities all of the memberships or interests of which are owned by the membership nonprofit corporation. (b) Unless the certificate of incorporation otherwise provides, without limiting the rights of a secured party under applicable law, no approval by members or any person or group of persons specified in the certificate of incorporation shall be required by Section 10A-3A-10.02 for a sale, lease, exchange, or other disposition of any of the membership nonprofit corporation’s assets if those assets are mortgaged, pledged, dedicated to the repayment of indebtedness, or otherwise encumbered for the benefit of a secured party or other creditor and either: (1) The secured party or other creditor exercises its rights under the law governing the mortgage, pledge, dedication, or encumbrance, or other applicable law, whether under the Uniform Commercial Code, a real property law, or other law, to effect the sale, lease, exchange, or other disposition of those assets without the consent of the corporation; or (2) In lieu of the secured party or other creditor exercising such rights, the board of directors of the membership nonprofit corporation authorizes an alternative sale, lease, exchange, or other disposition of those assets, whether with the secured party or other creditor, that results in the reduction or elimination of the total liabilities or obligations secured by those assets, provided that (i) the value of those assets is less than or equal to the total amount of the liabilities or obligations being eliminated or reduced and (ii) the sale, lease, exchange, or other disposition of those assets is not prohibited by the law governing the mortgage, pledge, dedication, or encumbrance. The provision of consideration to the membership nonprofit corporation shall not create a presumption that the value of the assets is greater than the total amount of the liabilities or obligations being eliminated or reduced. (c) A failure to satisfy the condition in subsection (b)(2)(i) shall not result in the invalidation of a sale, lease, exchange, or other disposition of the membership nonprofit corporation’s assets if the transferee of those assets (i) provided value therefor (which may include the reduction or elimination of the total liabilities or obligations secured by those assets) and (ii) acted in good faith (as defined in Section 7-1-201(b)). The preceding sentence shall not apply to a proceeding against the membership nonprofit corporation and any other necessary parties to enjoin the sale, lease, exchange, or other disposition of the membership nonprofit corporation’s assets before the consummation thereof and shall not eliminate any liability for monetary damages for any claim, including a claim in the right of the membership nonprofit corporation, based upon a violation of a duty by a current or former director or officer, or other person. (d) A provision of the certificate of incorporation that requires the authorization or consent of members or any person or group of persons specified in the certificate of incorporation for a sale, lease, exchange, or other disposition of the membership nonprofit corporation’s assets shall not apply to a transaction permitted by subsection (b) unless that provision expressly so requires. (Act 2023-503, §1; Act 2024-413, §1.)

Ala. Code § 10A-3A-10.02 Member Approval of Certain Dispositions in Membership Nonprofit Corporation.

10A-3A-10.02. Member Approval of Certain Dispositions in Membership Nonprofit Corporation. (a) A sale, lease, exchange, or other disposition of assets, other than a disposition described in Section 10A-3A-10.01, requires approval of the membership nonprofit corporation’s members if the disposition would leave the membership nonprofit corporation without a significant continuing activity. A membership nonprofit corporation will conclusively be deemed to have retained a significant continuing activity if it retains an activity that represented, for the membership nonprofit corporation and its subsidiaries on a consolidated basis, at least (i) 25 percent of total assets at the end of the most recently completed fiscal year, and (ii) either 25 percent of either income from continuing operations before taxes or 25 percent of revenues from continuing operations, in each case for the most recently completed fiscal year. (b) To obtain the approval of the members under subsection (a), the board of directors shall first adopt a resolution authorizing the disposition. The disposition shall then be approved by the members. In submitting the disposition to the members for approval, the board of directors shall recommend that the members approve the disposition, unless the board of directors makes a determination that because of conflicts of interest or other special circumstances it should not make a recommendation, in which case the board of directors must inform the members of the basis for that determination. (c) The board of directors may set conditions for the approval by the members of a disposition or the effectiveness of the disposition. (d) If a disposition is required to be approved by the members under subsection (a), and if the approval is to be given at a meeting, the membership nonprofit corporation shall notify each member entitled to vote on the matter of the meeting of members at which the disposition is to be submitted for approval. The notice must state that the purpose, or one of the purposes, of the meeting is to consider the disposition and must contain a description of the disposition, including the terms and conditions of the disposition and the consideration to be received by the membership nonprofit corporation. (e) Unless the certificate of incorporation, bylaws, or the board of directors acting pursuant to subsection (c) requires a greater vote or a greater quorum, the approval of a disposition by the members shall require the approval of the members at a meeting at which a quorum exists consisting of a majority of the votes entitled to be cast on the disposition. (f) After a disposition has been approved by the members under this Article 10, and at any time before the disposition has been consummated, it may be abandoned by the membership nonprofit corporation without action by the members, subject to any contractual rights of other parties to the disposition. (g) A disposition of assets in the course of dissolution under Article 11 is not governed by this section. (h) For purposes of this section only, the property and assets of the membership nonprofit corporation include the property and assets of any subsidiary of the membership nonprofit corporation. As used in this subsection, “subsidiary” means any entity wholly owned and controlled, directly or indirectly, by the membership nonprofit corporation and includes, without limitation, nonprofit corporations, business corporations, partnerships (including limited liability partnerships), limited partnerships (including limited liability limited partnerships), limited liability companies, and/or statutory trusts, whether domestic or foreign. (i) In addition to the approval of a disposition of assets by the board of directors and members as required by this section, the disposition must also be approved in writing by a person or group of persons whose approval is required under the certificate of incorporation in accordance with Section 10A-3A-10.04. EndFragment (Act 2023-503, §1.)

Ala. Code § 10A-3A-10.03 Disposition of Assets in a Nonmembership Nonprofit Corporation.

10A-3A-10.03. Disposition of Assets in a Nonmembership Nonprofit Corporation. In a nonmembership nonprofit corporation: (a) Unless the certificate of incorporation otherwise provides: (1) a sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, the property and assets of the nonmembership nonprofit corporation may be approved by the board of directors; and (2) a sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, of the property and assets of the nonmembership nonprofit corporation approved by the board of directors under this section must also be approved by that person or group of persons whose approval is required by the certificate of incorporation in accordance with Section 10A-3A-10.04. (b) Unless the certificate of incorporation otherwise provides, without limiting the rights of a secured party under applicable law, no approval by any person or group of persons specified in the certificate of incorporation shall be required by this section for a sale, lease, exchange, or other disposition of any of the nonmembership nonprofit corporation’s assets if those assets are mortgaged, pledged, dedicated to the repayment of indebtedness, or otherwise encumbered for the benefit of a secured party or other creditor and either: (1) The secured party or other creditor exercises its rights under the law governing the mortgage, pledge, dedication, or encumbrance, or other applicable law, whether under the Uniform Commercial Code, a real property law, or other law, to effect the sale, lease, exchange, or other disposition of those assets without the consent of the nonmembership nonprofit corporation; or (2) In lieu of the secured party or other creditor exercising such rights, the board of directors of the nonmembership nonprofit corporation authorizes an alternative sale, lease, exchange, or other disposition of those assets, whether with the secured party or other creditor, that results in the reduction or elimination of the total liabilities or obligations secured by those assets, provided that (i) the value of those assets is less than or equal to the total amount of the liabilities or obligations being eliminated or reduced and (ii) the sale, lease, exchange, or other disposition of those assets is not prohibited by the law governing the mortgage, pledge, dedication, or encumbrance. The provision of consideration to the nonmembership nonprofit corporation shall not create a presumption that the value of the assets is greater than the total amount of the liabilities or obligations being eliminated or reduced. (c) A failure to satisfy the condition in subsection (b)(2)(i) shall not result in the invalidation of a sale, lease, exchange, or other disposition of the nonmembership nonprofit corporation’s assets if the transferee of those assets (i) provided value therefor (which may include the reduction or elimination of the total liabilities or obligations secured by those assets) and (ii) acted in good faith (as defined in Section 7-1-201(b)). The preceding sentence shall not apply to a proceeding against the nonmembership nonprofit corporation and any other necessary parties to enjoin the sale, lease, exchange, or other disposition of the nonmembership nonprofit corporation’s assets before the consummation thereof and shall not eliminate any liability for monetary damages for any claim, including a claim in the right of the nonmembership nonprofit corporation, based upon a violation of a duty by a current or former director or officer, or other person. (d) A provision of the certificate of incorporation that requires the authorization or consent of any person or group of persons specified in the certificate of incorporation for a sale, lease, exchange, or other disposition of the nonmembership nonprofit corporation’s assets shall not apply to a transaction permitted by subsection (b) unless that provision expressly so requires. (Act 2023-503, §1; Act 2024-413, §1.)

Ala. Code § 10A-3A-10.04 Approval by Specified Person or Group of Persons.

10A-3A-10.04. Approval by Specified Person or Group of Persons. (a) The certificate of incorporation of a membership nonprofit corporation may require that a disposition of assets under either or both Section 10A-3A-10.01 and Section 10A-3A-10.02 be approved in writing by a specified person or group of persons in addition to the board of directors and members. (b) The certificate of incorporation of a nonmembership nonprofit corporation may require that a disposition of assets under Section 10A-3A-10.03 be approved in writing by a specified person or group of persons in addition to the board of directors. (c) A requirement in the certificate of incorporation described in subsection (a) or (b) may only be approved by the written approval of the specified person or group of persons. (Act 2023-503, §1; Act 2024-413, §1.)

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