Ratification of Defective Corporate Actions.

Ala. Code tit. 10A, ch. 2A, art. 1, div. D

in effect

Ala. Code § 10A-2A-1.45 Definitions.

10A-2A-1.45. Definitions. In this article: (1) “Corporate action” means any action taken by or on behalf of the corporation, including any action taken by the incorporator, the board of directors, a committee of the board of directors, an officer or agent of the corporation or the stockholders. (2) “Date of the defective corporate action” means the date (or the approximate date, if the exact date is unknown) the defective corporate action was purported to have been taken. (3) “Defective corporate action” means (i) any corporate action purportedly taken that is, and at the time such corporate action was purportedly taken would have been, within the power of the corporation, but is void or voidable due to a failure of authorization, and (ii) an overissue. (4) “Failure of authorization” means the failure to authorize, approve, or otherwise effect a corporate action in compliance with the provisions of this chapter, the certificate of incorporation or bylaws, a corporate resolution, or any plan or agreement to which the corporation is a party, if and to the extent such failure would render such corporate action void or voidable. (5) “Overissue” means the purported issuance of: (i) stock of a class or series in excess of the number of shares of stock of a class or series the corporation has the power to issue under Section 10A-2A-6.01 at the time of such issuance; or (ii) stock of any class or series that is not then authorized for issuance by the certificate of incorporation. (6) “Putative stock” means the stock of any class or series (including stock issued upon exercise of rights, options, warrants, or other securities convertible into stock of the corporation, or interests with respect to such stock) that was created or issued as a result of a defective corporate action, that (i) but for any failure of authorization would constitute valid stock, or (ii) cannot be determined by the board of directors to be valid stock. (7) “Valid stock” means the stock of any class or series that has been duly authorized and validly issued in accordance with this chapter, including as a result of ratification or validation under this article. (8) “Validation effective time” with respect to any defective corporate action ratified under this article means the later of: (i) the time at which the ratification of the defective corporate action is approved by the stockholders, or if approval of stockholders is not required, the time at which the notice required by Section 10A-2A-1.49 becomes effective in accordance with Section 10A-2A-1.41; and (ii) the time at which any certificate of validation filed in accordance with Section 10A-2A-1.51 becomes effective. The validation effective time shall not be affected by the filing or pendency of a judicial proceeding under Section 10A-2A-1.52 or otherwise, unless otherwise ordered by the court. (Act 2019-94, §1.)

Ala. Code § 10A-2A-1.46 Defective Corporate Actions.

10A-2A-1.46. Defective Corporate Actions. (a) A defective corporate action shall not be void or voidable if ratified in accordance with Section 10A-2A-1.47 or validated in accordance with Section 10A-2A-1.52. (b) Ratification under Section 10A-2A-1.47 or validation under Section 10A-2A-1.52 shall not be deemed to be the exclusive means of ratifying or validating any defective corporate action, and the absence or failure of ratification in accordance with this article shall not, of itself, affect the validity or effectiveness of any corporate action properly ratified under common law or otherwise, nor shall it create a presumption that any such corporate action is or was a defective corporate action or void or voidable. (c) In the case of an overissue, putative stock shall be valid stock effective as of the date originally issued or purportedly issued upon: (1) the effectiveness under this article and under Article 10 of an amendment to the certificate of incorporation authorizing, designating, or creating such stock; or (2) the effectiveness of any other corporate action under this article ratifying the authorization, designation, or creation of such stock. (Act 2019-94, §1.)

Ala. Code § 10A-2A-1.47 Ratification of Defective Corporate Actions.

10A-2A-1.47. Ratification of Defective Corporate Actions. (a) To ratify a defective corporate action under this section (other than the ratification of an election of the initial board of directors under subsection (b)), the board of directors shall take action ratifying the action in accordance with Section 10A-2A-1.48, stating: (1) the defective corporate action to be ratified and, if the defective corporate action involved the issuance of putative stock, the number and type of shares of putative stock purportedly issued; (2) the date of the defective corporate action; (3) the nature of the failure of authorization with respect to the defective corporate action to be ratified; and (4) that the board of directors approves the ratification of the defective corporate action. (b) In the event that a defective corporate action to be ratified relates to the election of the initial board of directors of the corporation under Section 10A-2A-2.04(a)(2), a majority of the persons who, at the time of the ratification, are exercising the powers of directors may take an action stating: (1) the name of the person or persons who first took action in the name of the corporation as the initial board of directors of the corporation; (2) the earlier of the date on which such persons first took such action or were purported to have been elected as the initial board of directors; and (3) that the ratification of the election of such person or persons as the initial board of directors is approved. (c) If any provision of this chapter, the certificate of incorporation or bylaws, any corporate resolution, or any plan or agreement to which the corporation is a party in effect at the time action under subsection (a) is taken requires stockholder approval or would have required stockholder approval at the date of the occurrence of the defective corporate action, the ratification of the defective corporate action approved in the action taken by the directors under subsection (a) shall be submitted to the stockholders for approval in accordance with Section 10A-2A-1.48. (d) Unless otherwise provided in the action taken by the board of directors under subsection (a), after the action by the board of directors has been taken and, if required, approved by the stockholders, the board of directors may abandon the ratification at any time before the validation effective time without further action of the stockholders. (Act 2019-94, §1.)

Ala. Code § 10A-2A-1.48 Action on Ratification.

10A-2A-1.48. Action on Ratification. (a) The quorum and voting requirements applicable to a ratifying action by the board of directors under Section 10A-2A-1.47(a) shall be the quorum and voting requirements applicable to the corporate action proposed to be ratified at the time the ratifying action is taken. (b) If the ratification of the defective corporate action requires approval by the stockholders under Section 10A-2A-1.47(c), and if the approval is to be given at a meeting, the corporation shall notify each holder of valid and putative stock, regardless of whether entitled to vote of (i) the date of the action by the board of directors under Section 10A-2A-1.47(a), which shall be the record date, and (ii) the date of the occurrence of the defective corporate action, provided that notice shall not be required to be given to holders of valid or putative stock whose identities or addresses for notice cannot be determined from the records of the corporation. The notice must state that the purpose, or one of the purposes, of the meeting, is to consider ratification of a defective corporate action and must be accompanied by (i) either a copy of the action taken by the board of directors in accordance with Section 10A-2A-1.47(a) or the information required by Section 10A-2A-1.47(a)(1) through (a)(4), and (ii) a statement that any claim that the ratification of the defective corporate action and any putative stock issued as a result of the defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought within 120 days from the applicable validation effective time. (c) Except as provided in subsection (d) with respect to the voting requirements to ratify the election of a director, the quorum and voting requirements applicable to the approval by the stockholders required by Section 10A-2A-1.47(c) shall be the quorum and voting requirements applicable to the corporate action proposed to be ratified at the time of the stockholder approval. (d) The approval by stockholders to ratify the election of a director requires that the votes cast within the voting group favoring the ratification exceed the votes cast opposing the ratification of the election at a meeting at which a quorum is present. (e) Putative stock on the date of the action by the board of directors under Section 10A-2A-1.47(a) (and without giving effect to any ratification of putative stock that becomes effective as a result of the vote) shall neither be entitled to vote nor counted for quorum purposes in any vote to approve the ratification of any defective corporate action. (f) If the approval under this section of putative stock would result in an overissue, in addition to the approval required by Section 10A-2A-1.47, approval of an amendment to the certificate of incorporation under Article 10 to increase the number of shares of stock of an authorized class or series or to authorize the creation of a class or series of stock so there would be no overissue shall also be required. (Act 2019-94, §1; Act 2024-413, §1.)

Ala. Code § 10A-2A-1.49 Notice Requirements.

10A-2A-1.49. Notice Requirements. (a) Unless stockholder approval is required under Section 10A-2A-1.47(c), prompt notice of an action taken under Section 10A-2A-1.47 shall be given to each holder of valid and putative stock, regardless of whether entitled to vote, as of (i) the date of such action by the board of directors, and (ii) the date of the defective corporate action ratified, provided that notice shall not be required to be given to holders of valid and putative stock whose identities or addresses for notice cannot be determined from the records of the corporation. (b) The notice must contain (i) either a copy of the action taken by the board of directors in accordance with Section 10A-2A-1.47(a) or (b) or the information required by Section 10A-2A-1.47(a)(1) through (a)(4) or Section 10A-2A-1.47(b)(1) through (b)(3), as applicable, and (ii) a statement that any claim that the ratification of the defective corporate action and any putative stock issued as a result of such defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought within 120 days from the applicable validation effective time. (c) No notice under this section is required with respect to any action required to be submitted to stockholders for approval under Section 10A-2A-1.47(c) if notice is given in accordance with Section 10A-2A-1.48(b). (d) A notice required by this section may be given in any manner permitted by Section 10A-2A-1.41 and, for any corporation subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, may be given by means of a filing or furnishing of such notice with the United States Securities and Exchange Commission. (Act 2019-94, §1.)

Ala. Code § 10A-2A-1.50 Effect of Ratification.

10A-2A-1.50. Effect of Ratification. From and after the validation effective time, and without regard to the 120-day period during which a claim may be brought under Section 10A-2A-1.52: (a) Each defective corporate action ratified in accordance with Section 10A-2A-1.47 shall not be void or voidable as a result of the failure of authorization identified in the action taken under Section 10A-2A-1.47(a) or (b) and shall be deemed a valid corporate action effective as of the date of the defective corporate action; (b) The issuance of each share of putative stock or fraction of a share of putative stock purportedly issued pursuant to a defective corporate action identified in the action taken under Section 10A-2A-1.47 shall not be void or voidable, and each such share of putative stock or fraction of a share of putative stock shall be deemed to be an identical share of stock or fraction of a valid share of stock as of the time it was purportedly issued; and (c) Any corporate action taken subsequent to the defective corporate action ratified in accordance with this Division D of Article 1 in reliance on such defective corporate action having been validly effected and any subsequent defective corporate action resulting directly or indirectly from such original defective corporate action shall be valid as of the time taken. (Act 2019-94, §1.)

Ala. Code § 10A-2A-1.51 Filings.

10A-2A-1.51. Filings. (a) If the defective corporate action ratified under this Division D of Article 1 would have required under any other section of this chapter a filing instrument to be delivered to a filing officer for filing and either (i) the filing instrument requires any change to give effect to the defective corporate action in accordance with this Division D of Article 1 (including any change to the date and time of the effectiveness of the filing instrument) or (ii) a filing instrument under any other section of this chapter was not previously delivered to a filing officer for filing in respect of the defective corporate action, then, in lieu of a filing instrument otherwise required by this chapter, the corporation shall deliver a certificate of validation to the appropriate filing officer for filing in accordance with this section, and that certificate of validation shall serve to amend or substitute for any other filing instrument with respect to the defective corporate action required by this chapter. (b) The certificate of validation must set forth: (1) the name of the corporation; (2) the unique identifying number or other designation as assigned by the Secretary of State; (3) a statement that the defective corporate action was ratified in accordance with Section 10A-2A-1.47, including the date on which the board of directors ratified that defective corporate action and the date, if any, on which the stockholders approved the ratification of that defective corporate action; and (4) the information required by subsection (c). (c) The certificate of validation must also contain the following information: (1) if a filing instrument was previously delivered to a filing officer for filing in respect of the defective corporate action and that filing instrument requires any change to give effect to the ratification of that defective corporate action in accordance with Section 10A-2A-1.47, the certificate of validation must set forth (i) the name, title, and filing date of the filing instrument previously delivered to a filing officer for filing and any certificate of correction to that filing instrument, (ii) a statement that a filing instrument containing all of the information required to be included under the applicable section or sections of this chapter to give effect to that defective corporate action is attached as an exhibit to the certificate of validation, and (iii) the date and time that filing instrument is deemed to have become effective; or (2) if a filing instrument was not previously delivered to a filing officer for filing in respect of the defective corporate action and the defective corporate action ratified under Section 10A-2A-1.47 would have required a filing instrument under any other section of this chapter, the certificate of validation must set forth (i) a statement that a filing instrument containing all of the information required to be included under the applicable section or sections of this chapter to give effect to that defective corporate action is attached as an exhibit to the certificate of validation, and (ii) the date and time that filing instrument is deemed to have become effective. (Act 2019-94, §1; Act 2023-503, §3; Act 2024-413, §1.)

Ala. Code § 10A-2A-1.52 Judicial Proceedings Regarding Validity of Corporate Actions.

10A-2A-1.52. Judicial Proceedings Regarding Validity of Corporate Actions. (a) Upon application by the corporation, any successor entity to the corporation, a director of the corporation, any stockholder, beneficial stockholder or unrestricted voting trust beneficial owner of the corporation, including any stockholder, beneficial stockholder or unrestricted voting trust beneficial owner as of the date of the defective corporate action ratified under Section 10A-2A-1.47, or any other person claiming to be substantially and adversely affected by a ratification under Section 10A-2A-1.47, 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: (1) determine the validity and effectiveness of any corporate action or defective corporate action; (2) determine the validity and effectiveness of any ratification under Section 10A-2A-1.47; (3) determine the validity of any putative stock; and (4) modify or waive any of the procedures specified in Section 10A-2A-1.47 or Section 10A-2A-1.48 to ratify a defective corporate action. (b) In connection with an action under this section, the court may make such findings or orders, and take into account any factors or considerations, regarding such matters as it deems proper under the circumstances. (c) Service of process of the application under subsection (a) on the corporation may be made in any manner provided by statute of this state or by rule of the applicable court for service on the corporation, and no other party need be joined in order for the court to adjudicate the matter. In an action filed by the corporation, the court may require notice of the action be provided to other persons specified by the court and permit such other persons to intervene in the action. (d) Notwithstanding any other provision of this section or otherwise under applicable law, any action asserting that the ratification of any defective corporate action and any putative stock issued as a result of a defective corporate action should not be effective, or should be effective only on certain conditions, shall be brought within 120 days of the validation effective time. (Act 2019-94, §1; Act 2020-73, §7.)

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