HB 251

This bill would make certain technical corrections regarding the name of the Alabama Limited Liability Company Law, the ability of a partnership to continue as an entity for a brief period of time under the law with one partner or no partners, and the duty of a partner in a general partnership to not compete with the partnership before the partnership is dissolved

To amend Section 10A-5A-1.01, Code of Alabama 1975, and Sections 10A-8A-1.02 and 10A-8A-4.11, as added to the Code of Alabama 1975, by Act 2018-125 of the 2018 Regular Session, relating to business corporations; to make certain technical corrections regarding the name of the Alabama Limited Liability Company Law, the ability of a partnership to continue as an entity for a brief period of time under the law with one partner or no partners, and the duty of a partner in a general partnership to not compete with the partnership before the partnership is dissolved; and to provide for a retroactive effective date.

Section 1

Section 10A-5A-1.01 of the Code of Alabama 1975, and Sections 10A-8A-1.02 and 10A-8A-4.11 of the Code of Alabama 1975, as added by Act 2018-125 of the 2018 Regular Session, are amended to read as follows:

§10A-5A-1.01.

This chapter and the provisions of Chapter 1, to the extent applicable to limited liability companies, shall be known and may be cited as the "Alabama Limited Liability Company Law of 2014."

§10A-8A-1.02.

Notwithstanding Section 10A-1-1.03, as used in this chapter, unless the context otherwise requires, the following terms mean:

(1) "Business" includes every trade, occupation, and profession for profit.

(2) "Disqualified person" means any person who is not a qualified person.

(3) "Distribution" except as otherwise provided in Section 10A-8A-4.09(f), means a transfer of money or other property from a partnership to another person on account of a transferable interest.

(4) "Foreign limited liability partnership" means a foreign partnership whose partners have limited liability for the debts, obligations, or other liabilities of the foreign partnership under a provision similar to Section 10A-8A-3.06(c).

(5) "Foreign partnership" means a partnership governed by the laws of a jurisdiction other than this state which would be a partnership if governed by the laws of this state. The term includes a foreign limited liability partnership.

(6) "Limited liability partnership", except in the phrase "foreign limited liability partnership", means a partnership that has filed a statement of limited liability partnership under Section 10A-8A-10.01, and does not have a similar statement in effect in any other jurisdiction.

(7) "Not for profit activity" includes every undertaking not for profit.

(8) "Partner" means a person that:

(A) has become a partner in a partnership under Section 10A-8A-4.02 or was a partner in a partnership when the partnership became subject to this chapter; and

(B) has not dissociated as a partner under Section 10A-8A-6.01.

(9) "Partnership" means an association of two or more persons entity that is formed under Section 10A-8A-2.01, predecessor statute, or comparable law of another jurisdiction or becomes subject to the laws of this state pursuant to Section 10A-8A-1.06, to carry on any business or not for profit activity, and this chapter or that is governed by this chapter. The term includes, for all purposes of the laws of this state, a limited liability partnership.

(10) "Partnership agreement" means any agreement (whether referred to as a partnership agreement or otherwise), written, oral or implied, of the partners as to the business or not for profit activity of a partnership. The partnership agreement includes any amendments to the partnership agreement.

(11) "Partnership at will" means a partnership in which the partners have not agreed to remain partners until the expiration of a definite term or the completion of a particular undertaking.

(12) "Person dissociated as a partner" means a person dissociated as a partner of a partnership.

(13) "Qualified person," with respect to a partnership rendering professional services in this state, means a person authorized by this state or a regulatory authority of this state to own a transferable interest in that partnership.

(14) "Required information" means the information that a partnership is required to maintain under Section 10A-8A-1.11.

(15) "Statement" means a statement of partnership under Section 10A-8A-2.02, a statement of not for profit partnership under Section 10A-8A-2.02, a statement of authority under Section 10A-8A-3.03, a statement of denial under Section 10A-8A-3.04, a statement of dissociation under Section 10A-8A-7.04, a statement of dissolution under Section 10A-8A-8.02 or under Section 10A-8A-8.03, a certificate of reinstatement under Section 10A-8A-8.11, a statement of limited liability partnership under Section 10A-8A-10.01, a statement of cancellation under Section 10A-8A-10.01, or any other document required or permitted to be delivered to the Secretary of State for filing under this chapter, or an amendment or cancellation of any of the foregoing.

(16) "Transfer" means an assignment, conveyance, deed, bill of sale, lease, mortgage, security interest, encumbrance, gift, or transfer by operation of law.

(17) "Transferable interest" means a partner's right to receive distributions from a partnership.

(18) "Transferee" means a person to which all or part of a transferable interest has been transferred, whether or not the transferor is a partner.

§10A-8A-4.11.

(a) The duties that a partner has to the partnership and to the other partners include the duty of loyalty and the duty of care as described in subsections (b) and (c).

(b) A partner's duty of loyalty to the partnership and to the other partners includes each of the following:

(1) to account to the partnership and to hold as trustee for it any property, profit, or benefit derived by the partner in the conduct or winding up of the partnership's business or not for profit activity or derived from a use by the partner of partnership property, including the appropriation of a partnership opportunity;

(2) to refrain from dealing with the partnership in the conduct or winding up of the partnership's business or not for profit activity as or on behalf of a party having an interest adverse to the partnership; and

(3) to refrain from competing with the partnership in the conduct or winding up of the partnership's business or not for profit activity before the dissolution of the partnership.

(c) A partner's duty of care to the partnership and to the other partners in the conduct or winding up of the partnership's business or not for profit activity includes refraining from engaging in grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law.

(d) A partner shall discharge the duties to the partnership and to the other partners under this chapter and under the partnership agreement and exercise any rights consistently with the implied contractual covenant of good faith and fair dealing.

(e) A partner does not violate a duty or obligation under this chapter or under the partnership agreement merely because the partner's conduct furthers the partner's own interest."

Section 2

This act shall become effective retroactive to January 1, 2019, following its passage and approval by the Governor, or its otherwise becoming law.