Alabama Code 10A-1-8.01. Conversion of business and nonprofit entities

A conversion of an entity may be accomplished as provided in this section:

(a) The plan of conversion must be in writing, and:

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Terms Used In Alabama Code 10A-1-8.01

Amendment: A proposal to alter the text of a pending bill or other measure by striking out some of it, by inserting new language, or both. Before an amendment becomes part of the measure, thelegislature must agree to it.
Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
Contract: A legal written agreement that becomes binding when signed.
Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
Deed: The legal instrument used to transfer title in real property from one person to another.
Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
following: means next after. See Alabama Code 1-1-1
Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
Obligation: An order placed, contract awarded, service received, or similar transaction during a given period that will require payments during the same or a future period.
Partnership: A voluntary contract between two or more persons to pool some or all of their assets into a business, with the agreement that there will be a proportional sharing of profits and losses.
Probate: Proving a will
property: includes both real and personal property. See Alabama Code 1-1-1
Real property: Land, and all immovable fixtures erected on, growing on, or affixed to the land.
real property: includes lands, tenements and hereditaments. See Alabama Code 1-1-1
state: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Alabama Code 1-1-1
Statute: A law passed by a legislature.
writing: includes typewriting and printing on paper. See Alabama Code 1-1-1

(1) must include the following:

(A) the name, type of entity, and mailing address of the principal office of the converting entity, and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;

(B) the name, type of entity, and mailing address of the principal office of the converted entity after conversion;

(C) the terms and conditions of the conversion, including the manner and basis for converting interests in the converting entity into any combination of money, interests in the converted entity, and other consideration allowed in subsection (b); and

(D) the organizational documents of the converted entity; and

(2) may include other provisions relating to the conversion not prohibited by law.

(b) In connection with a conversion, rights or securities of or interests in a converting entity may be exchanged for or converted into cash, property, or rights or securities of or interests in the converted entity, or, in addition to or in lieu thereof, may be exchanged for or converted into cash, property, or rights or securities of or interests in another entity, or may be cancelled.

(c) The plan of conversion of an entity must be approved as follows:

(1) CORPORATIONS.

(A) If a corporation is governed by Chapter 2A and that corporation is a converting entity, the plan of conversion under subsection (a) must be approved in accordance with Article 9 of Chapter 2A. If the conversion is a corporate action as described in Section 10A-2A-13.02, then the rights, obligations, and procedures under Article 13 of Chapter 2A shall be applicable to that conversion.

(B) If a corporation is governed by Chapter 3A and that corporation is a converting entity, the plan of conversion under subsection (a) must be approved in accordance with Article 13 of Chapter 3A.

(C) If a corporation is not governed by Chapter 2A or Chapter 3A and that corporation is a converting entity, the plan of conversion under subsection (a) must be approved in accordance with the law of the jurisdiction of formation of that corporation.

(2) LIMITED PARTNERSHIPS, INCLUDING LIMITED LIABILITY LIMITED PARTNERSHIPS. If a limited partnership is a converting entity, the plan of conversion under subsection (a) must be approved in accordance with Article 10 of Chapter 9A.

(3) LIMITED LIABILITY COMPANIES. If a limited liability company is a converting entity, the plan of conversion under subsection (a) must be approved in accordance with Article 10 of Chapter 5A.

(4) GENERAL PARTNERSHIPS, INCLUDING LIMITED LIABILITY PARTNERSHIPS. If a general partnership is a converting entity, the plan of conversion under subsection (a) must be approved in accordance with Article 9 of Chapter 8A. If a general partnership is the converting entity and that general partnership does not have an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, then that general partnership must, before proceeding with a conversion deliver to the Secretary of State for filing, a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership simultaneously with the delivery to the Secretary of State for filing, of a statement of conversion.

(5) REAL ESTATE INVESTMENT TRUST. The terms and conditions of the plan of conversion under subsection (a) of a real estate investment trust must be approved by all of the trust’s shareholders or as otherwise provided in the trust’s declaration of trust; but in no case may the vote required for shareholder approval be set at less than a majority of all the votes entitled to be cast. No conversion of a real estate investment trust to a general or limited partnership may be effected without the consent in writing of each shareholder who will have personal liability with respect to the converted entity, notwithstanding any provision in the declaration of trust of the converting real estate investment trust providing for less than unanimous shareholder approval for the conversion.

(6) OTHER ENTITY. In the case of an entity not specified in paragraphs (1) through (5) above, a plan of conversion under subsection (a) must be approved in writing by all owners of that entity or, if the entity has no owners, then by all members of the governing authority of that entity.

(d) After the plan of conversion is approved pursuant to subsection (c):

(1) if the converting entity is a filing entity, the converting entity shall deliver to the Secretary of State for filing, a statement of conversion, which must include:

(B) a statement that the converting entity has been converted into the converted entity;

(C) the name and type of entity of the converted entity and the jurisdiction of its governing statute;

(D) the street and mailing address of the principal office of the converted entity;

(E) the date the conversion is effective under the governing statute of the converted entity;

(F) a statement that the conversion was approved as required by this chapter;

(G) a statement that the conversion was approved as required by the governing statute of the converted entity;

(H) a statement that a copy of the plan of conversion will be furnished by the converted entity, on request and without cost, to any owner of the converted or converting entity; and

(I) if the converted entity is a foreign entity not authorized to conduct activities and affairs in this state, the street and mailing address of an office for the purposes of Section 10A-1-8.04(b); and

(2) if the converted entity is (I) a filing entity, the converting entity shall deliver to the Secretary of State for filing a certificate of formation or (II) a general partnership, the converting entity shall deliver to the Secretary of State for filing a statement of partnership, a statement of not for profit partnership, or a statement of limited liability partnership, as applicable, which certificate of formation or statement of partnership, statement of not for profit partnership, or statement of limited liability partnership, as applicable, must include, in addition to the information required in the chapter governing the certificate of formation of the converted entity, the following:

(A) The name, mailing address of the principal office of, type of entity, and the jurisdiction of the governing statute of the converting entity and its unique identifying number or other designation as assigned by the Secretary of State, if any, before conversion;

(B) A statement that the converting entity has been converted into the converted entity;

(C) The filing office where the certificate of formation, if any, of the converting entity is filed and the date of the filing thereof;

(D) If the converted entity is one in which one or more owners lack limited liability protection, a statement that each owner of the converting entity who is to become an owner without limited liability protection of the converted entity has consented in writing to the conversion as required by this section; and

(E) A statement that the conversion was approved pursuant to this section and, if the converting entity is a foreign entity, that the conversion was approved as required by the governing statute of such foreign entity;

(3) if the converting entity is required pursuant to subsections (e)(2) and (3) to deliver to the Secretary of State for filing both (I) a statement of conversion and (II)(A) a certificate of formation, or (B) a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership, as applicable, then the converting entity shall deliver the statement of conversion and the certificate of formation or the statement of partnership, statement of not for profit partnership, or statement of limited liability partnership, as applicable, to the Secretary of State simultaneously; and

(4) if the converting entity is a general partnership and that partnership does not have an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, then the converting entity must deliver to the Secretary of State for filing, a statement of partnership, statement of not for profit partnership, or statement of limited liability partnership simultaneously with the delivery to the Secretary of State for filing, of a statement of conversion.

(e) After a plan of conversion is approved and before the conversion takes effect, the plan may be amended or abandoned as provided in the plan, or if the plan does not provide for amendment or abandonment, in the same manner as required for the approval of the plan of conversion originally.

(f) A conversion becomes effective:

(1) if the converted entity is a filing entity, the effective date determined in accordance with Article 4 of this chapter; and

(2) if the converted entity is not a domestic filing entity, as provided by the governing statute of the converted entity.

(g) When a conversion becomes effective:

(1) all property and contract rights owned by the converting entity remain vested in the converted entity without transfer, reversion, or impairment, and the title to any property vested by deed or otherwise in the converting entity shall not revert or be in any way impaired by reason of the conversion;

(2) all debts, obligations, or other liabilities of the converting entity continue as debts, obligations, or other liabilities of the converted entity and neither the rights of creditors nor the liens upon the property of the converting entity shall be impaired by the conversion;

(3) an action or proceeding pending by or against the converting entity continues as if the conversion had not occurred and the name of the converted entity may, but need not, be substituted for the name of the converting entity in any pending action or proceeding;

(4) except as prohibited by law other than this chapter, all of the rights, privileges, immunities, powers, and purposes of the converting entity remain vested in the converted entity;

(5) except as otherwise provided in the statement of conversion, the terms and conditions of the statement of conversion take effect;

(6) except as otherwise agreed, for all purposes of the laws of this state, the converting entity shall not be required to wind up its affairs or pay its liabilities and distribute its assets, and the conversion shall not be deemed to constitute a dissolution of the converting entity;

(7) for all purposes of the laws of this state, the rights, privileges, powers, interests in property, debts, liabilities, and duties of the converting entity, shall be the rights, privileges, powers, interests in property, debts, liabilities, and duties of the converted entity, and shall not be deemed as a consequence of the conversion, to have been transferred to the converted entity;

(8) if the converted entity is a domestic entity, for all purposes of the laws of this state, the converted entity shall be deemed to be the same entity as the converting entity, and the conversion shall constitute a continuation of the existence of the converting entity in the form of the converted entity;

(9) if the converting entity is a domestic entity, the existence of the converted entity shall be deemed to have commenced on the date the converting entity commenced its existence in the jurisdiction in which the converting entity was first created, formed, organized, incorporated, or otherwise came into being;

(10) the conversion shall not affect the choice of law applicable to matters arising prior to conversion;

(11) if the Secretary of State has assigned a unique identifying number or other designation to the converting entity and (i) the converted entity is formed pursuant to the laws of this state, or (ii) the converted entity is, within 30 days after the effective date of the conversion, registered to transact business in this state, then that unique identifying number or other designation shall continue to be assigned to the converted entity; and

(12)

(A) An owner with limited liability protection remains liable, if at all, for an obligation incurred by the converting entity before the conversion takes effect only to the extent, if any, the owner would have been liable if the conversion had not occurred.

(B) An owner with limited liability protection who becomes an owner without limited liability protection is liable for an obligation of the converted entity incurred after conversion to the extent provided for by the laws applicable to the converted entity.

(13) An owner without limited liability protection who as a result of a conversion becomes an owner of a converted entity with limited liability protection remains liable for an obligation incurred by the converting entity before the conversion takes effect only to the extent, if any, the owner would have been liable if the conversion had not occurred.

(h) If:

(1) the converting entity is a filing entity, a general partnership with an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, a foreign filing entity registered to transact business or not for profit activity in this state, or a qualified foreign limited liability partnership;

(2) the converted entity will be a filing entity, a general partnership with an effective statement of partnership, statement of not for profit partnership, or statement of limited liability partnership on file with the Secretary of State, a foreign filing entity registered to transact business or not for profit activity in this state, or a qualified foreign limited liability partnership;

(3) the name of the converting entity and the converted entity are to be the same, other than words, phrases, or abbreviations indicating the type of entity; and

(4) the name of the converted entity complies with Division A of Article 5 or Section 10A-1-7.07, as the case may be;

then, notwithstanding Division B of Article 5, no name reservation shall be required and the converted entity shall for all purposes of this title be entitled to utilize the name of the converting entity without any further action by the converting entity or the converted entity.

(i) A certified copy of the statement of conversion may be delivered to the office of the judge of probate in any county in which the converting entity owned real property, to be recorded without payment and without collection by the judge of probate of any deed or other transfer tax or fee. The judge of probate shall, however, be entitled to collect a filing fee of five dollars ($5). Any filing shall evidence chain of title, but lack of filing shall not affect the converted entity’s title to the real property.

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