HB531 Alabama 2013 Session

Summary

Primary Sponsor

Paul DeMarco

Republican

Co-Sponsors

Paul BeckmanJohn Merrill

Session

Regular Session 2013

Title

Business entities, limited liability companies, formation of company agreement, filing, notice third parties, rights where operating agreement silent, Secs. 10A-1-1.03, 10A-1-1.08 am'd.; Secs. 10A-5-1.01 to 10A-5-9.06, inclusive, repealed; Secs. 10A-5A-1.01 to 10A-5A-12.08, inclusive, added

Summary

HB531 updates Alabama's LLC law by adopting a Uniform Limited Liability Company framework (2014), adds the concept of designated series, and sets new rules for formation, governance, transfers, distributions, dissolution, mergers, and professional services, with transition provisions for existing firms.

What This Bill Does

The bill replaces the old LLC law with Chapter 5A, creating uniform formation and filing procedures (certificate of formation, dissolution/merger/conversion filings) and requiring notice to third parties. It introduces designated series, allowing separate assets and liabilities for each series and isolating series obligations from one another. It clarifies governance through the LLC agreement (with default to member control if silent) and establishes duties of loyalty and care, plus non-eliminable good faith obligations, with penalties and remedies. It also sets out rules for transfers, distributions, dissolution and winding up (including series-specific dissolution), and adds special rules for professional services and transition provisions for existing LLCs.

Who It Affects

• Members and managers of Alabama LLCs (including those formed as designated series) by shaping governance, duties, distributions, admission/dissociation, and dissolution procedures.
• Creditors, transferees, and holders of transferable interests (including those related to a series) by outlining their rights to distributions, charging orders, and remedies related to series assets and wind-up.

Key Provisions

• Establishes the Alabama Limited Liability Company Law of 2014 (Chapter 5A) and repeals the previous LLC statutes, with transitional rules for existing firms.
• Creates a certificate of formation system and filing requirements (with notices for formation, dissolution, merger, and conversion) and designates filing locations (Secretary of State or Judge of Probate as appropriate).
• Introduces one or more designated series within a single LLC, each with separate assets and liabilities that cannot be used to satisfy another series' obligations; provides for series governance and wind-up.
• Governing relations are primarily set by the limited liability company agreement; in the absence of specific provisions, members direct the company, while fiduciary and contractual duties (loyalty, care, and good faith) apply and cannot be completely eliminated.
• Transfers of a member’s transferable interest are allowed but subject to restrictions; transferees have rights to distributions but typically no immediate rights to participate in management or access records unless provided by the agreement.
• Distributions are governed by solvency tests and may be made in cash or in-kind, with protections to ensure creditors are paid and accompanying remedies for improper distributions.
• Dissolution, wind-up, and reinstatement rules are detailed (including dissolution events, winding up by designated persons, and conditions for reinstatement) with specific processes for series and for known/unknown claims.
• Professional services LLCs receive special rules on personal liability of professionals, licensing compliance, and transfer restrictions to qualified persons; cross-border (foreign) entities are addressed.
• Derivatives and member actions are recognized, including direct and derivative actions by members, standing requirements, demand procedures, stay orders, and court oversight of settlements.
• Transition provisions establish when the new law applies (newly formed LLCs from 2014 onward; existing LLCs may elect to be governed by the new law; full applicability by 2016).
• Cross-state and foreign entity provisions allow conversions, mergers, and enforcement across jurisdictions, with filing and notice requirements to ensure legal continuity.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Business Entities