SB3 Alabama 2014 Session

Summary

Primary Sponsor

Rodger SmithermanSenator

Democrat

Session

Regular Session 2014

Title

Limited liability companies, formation of company agreement, filing, notice third parties, rights where operating agreement silent, Alabama Limited Liability Law of 2014, Secs. 10A-1-1.03, 10A-1-1.08 am'd.; Secs. 10A-5-1.01 to 10A-5-9.06, inclusive, repealed; Secs. 10A-5A-1.01 to 10A-5A-12.08, inclusive, added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

SB3 updates Alabama's LLC law by adopting a Uniform Alabama Limited Liability Company Law of 2014, modernizing formation, governance, and the use of series of assets.

What This Bill Does

It replaces the old LLC law with a new framework that treats LLC agreements as flexible contracts (but preserves the implied covenant of good faith). It requires filings with the Secretary of State to provide third parties notice about formation, dissolution, merger, or conversion, and it sets governance rules where the LLC agreement or, if silent, the members decide who directs the company. It introduces the concept of designated series of assets with separate liabilities and protections that keep one series from being liable for another. It also lays out protections for creditors, distribution rules to maintain solvency, rules for transfers and dissociations, and new rules for professional services, dissolution, and transition for existing LLCs.

Who It Affects

• Members and managers of Alabama LLCs would see changes in governance, including how the company is directed, how distributions are made, and how a member can dissociate, with the LLC agreement guiding most decisions (and unanimous consent required for major actions).
• Third parties and creditors dealing with Alabama LLCs would gain notice rights about formation, dissolution, merger, and conversion, and would be limited to charging distributions via charging orders, with assets in a designated series protected from liabilities of other series.

Key Provisions

• Creates the Alabama Limited Liability Company Law of 2014 (Chapter 5A) and repeals older LLC provisions, with transitional rules for applying the new framework.
• LLC agreements are recognized as contracts that may be modified, but the implied covenant of good faith and fair dealing cannot be eliminated.
• LLCs must file specific formation, dissolution, merger, and conversion documents with the Secretary of State to provide notice to third parties.
• Establishes a designatable series of assets within an LLC, where each series has its own assets and liabilities, and those of one series cannot satisfy the obligations of another.
• Defines governance so that the LLC agreement controls directing and oversight; matters in the ordinary course can be decided by a majority of members, while certain actions require consent of all members.
• Provides liability protections for members (not liable for the LLC's debts merely by being a member) and limits the authority to bind the LLC to actions authorized by the LLC agreement or applicable law.
• Imposes distribution limitations to protect creditors; improper distributions can create liability, and distributions are generally limited to the assets available after liabilities are considered.
• Sets out rules for transfers and charging orders, with charging orders as the exclusive remedy for judgment creditors to reach a member's transferable interest.
• Outlines the dissociation, dissolution, wind-up, and reinstatement processes, including judicial oversight where appropriate and transitional provisions for pre-existing LLCs.
• Imposes special rules for LLCs performing professional services, including transfer restrictions (to qualified persons) and buyout procedures upon death or disqualification.
• Governs mergers and conversions, including required plans, filings, and the effects on continuation of entities and their assets and liabilities.

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