SB342 Alabama 2013 Session

Summary

Primary Sponsor

Rodger SmithermanSenator

Democrat

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rights where operating agreement silent, Secs. 10A-1-1.03, 10A-1-1.08 am'd.; Secs. 10A-5-1.01 to 10A-5-9.06, inclusive, repealed; Secs. 10A-5A-1.01 to 10A-5A-12.08, inclusive, added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

SB342 creates the Uniform Alabama Limited Liability Company Law of 2014, updating formation, governance, and notice rules for LLCs and introducing the concept of designated series of assets.

What This Bill Does

It replaces the old LLC statute with Chapter 5A, outlining how an LLC is formed, governed by an LLC agreement, and how notices to third parties are given through filings. It clarifies that the LLC agreement is a contract between members, can be modified, but the implied covenant of good faith and fair dealing cannot be eliminated. It allows LLCs to create one or more designated series with separate assets and liabilities, and sets rules for distributions, transfers, dissolution, and wind-up, including procedures for professional services LLCs and for conversions/mergers. It also establishes transition rules for existing LLCs and sets filing and notice requirements with the Secretary of State and other filing offices.

Who It Affects

• Members and managers of Alabama LLCs: their rights, duties, and governance are largely determined by the LLC agreement, and they must follow new rules on formation, distributions, and dissolution; some duties can be modified while others (like good faith and fair dealing) remain protected.
• Third parties dealing with LLCs (creditors, lenders, and other entities): they receive notice of formation, dissolution, mergers, or conversions via state filings, and their rights to distributions and claims are affected by new charging order provisions and series protections.

Key Provisions

• Establishes the Alabama Limited Liability Company Law of 2014 (Chapter 5A) and defines its scope and application, including transition for existing LLCs.
• LLC agreement governs relations among members and with the LLC, with the implied covenant of good faith and fair dealing preserved; duties may be expanded or restricted by written agreement.
• Allows the creation of designated series within an LLC, each with separate assets and liabilities that cannot be used to satisfy the obligations of other series or the LLC itself.
• Requires formation, dissolution, merger, and conversion to be evidenced by filings that provide notice to third parties; filings occur with the Secretary of State or other appropriate filing offices.
• Sets rules on distributions before dissolution, including limits to protect the company’s solvency and penalties for improper distributions.
• Provides for transfer of transferable interests, charging orders as the exclusive remedy for certain creditors, and conditions under which transferees gain rights to distributions.
• Outlines member dissociation, dissolution, wind-up, and reinstatement processes, including timelines and court involvement for disputed values or conditions.
• Implements special rules for LLCs performing professional services, including personal liability for professional acts and transfer restrictions to qualified persons.
• Details rules for conversions and mergers, including consent requirements, plan of conversion/merger contents, and the effect of such transactions on existing rights and property.

AI-generated summary using openai/gpt-5-nano on Feb 25, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Business Entities