Section 10A-1-8.01

Conversion of business and nonprofit entities.

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

(1) CORPORATIONS.

a. The terms and conditions of a conversion of a corporation other than a nonprofit corporation must be approved by all of the corporation's shareholders except as otherwise provided in the corporation's governing documents; but in no case may the vote required for shareholder approval be set at less than a majority of the votes entitled to be cast by each voting group entitled by law to vote separately on the conversion. If the governing documents provide for approval of a conversion by less than all of a corporation's shareholders, approval of the conversion shall constitute corporate action subject to dissenter's rights pursuant to Article 13 of Chapter 2 of the Alabama Business Corporation Law. No conversion of a corporation 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 governing documents of the converting corporation providing for less than unanimous shareholder approval for the conversion.

b. The terms and conditions of a conversion of a nonprofit corporation must be approved by all the corporation's members entitled to vote thereon, if it is a nonprofit corporation with members with voting rights, except as otherwise provided in the corporation's governing documents; but in no case may the governing documents provide for approval by less than a majority of the members entitled to vote thereon. If the converting nonprofit corporation has no members, or no members entitled to vote thereon, the terms and conditions of the conversion must be approved by a unanimous vote of the board of directors of the converting nonprofit corporation, except as otherwise provided in the governing documents; but in no case may the governing documents provide for approval by less than a majority of the board of directors.

(2) LIMITED PARTNERSHIPS. The terms and conditions of a conversion of a limited partnership must be approved by all of the partners or as otherwise provided in the partnership agreement. No conversion of a limited partnership to a general partnership may be effected without the consent in writing of each limited partner who will have personal liability with respect to the converted entity, notwithstanding any provision in the limited partnership agreement of the converting limited partnership providing for approval of the conversion by less than all partners.

(3) LIMITED LIABILITY COMPANIES. The terms and conditions of a conversion of a limited liability company must be approved by all of the limited liability company's members or as otherwise provided in the limited liability company's governing documents. No conversion of a limited liability company to a general or limited partnership may be effected without the consent in writing of each member who will have personal liability with respect to the converted entity, notwithstanding any provision in the governing documents of the converting limited liability company providing for less than unanimous member approval for the conversion.

(4) GENERAL PARTNERSHIPS, INCLUDING REGISTERED LIMITED LIABILITY PARTNERSHIPS. The terms and conditions of a conversion of a general partnership must be approved by all of the partners or as otherwise provided in the partnership agreement. No conversion of a registered limited liability partnership to a general or limited partnership may be effected without the consent in writing of each partner who will have personal liability with respect to the converted entity, notwithstanding any provision in the partnership agreement of the converting registered limited liability partnership providing for less than unanimous partner approval for the conversion.

(5) REAL ESTATE INVESTMENT TRUST. The terms and conditions of a conversion of a real estate investment trust must be approved by all of the trust's shareholders except 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. The terms and conditions of a conversion of any entity not specified above must be approved by all owners of the converting entity. No conversion of any entity shall be effected without the consent in writing of any owner of the converting entity who has limited liability and who shall become an owner without limited liability protection of the converted entity.

(7) ENTITY WITHOUT OWNERS. If the converting entity does not have owners, the terms and conditions of the conversion must be unanimously approved by the governing authority of the converting entity.

(b) After the conversion is approved pursuant to subsection (a), the following documentation and filing requirements apply:

(1) If the conversion is to a corporation, limited liability company, limited partnership, real estate investment trust, or other entity required to file a certificate of formation, the statement of conversion, when filed in accordance with Section 10A-1-4.02(c)(1), shall be deemed to:

a. constitute a certificate of formation or amended and restated certificate of formation, as the case may be, for the converted entity; and

b. shall satisfy the requirements of Section 10A-1-4.02(a).

(2) In addition to any information or statements otherwise required by law to be included in a certificate of formation for a filing entity, a statement of conversion shall include the following:

a. The name and type of entity of the converted entity and the jurisdiction of its governing statute and its unique identifying number or other designation as assigned by the Secretary of State, if any.

b. The former name of the converting entity.

c. A statement that the converting entity has been converted into the converted entity.

d. The public office where the certificate of formation, if any, of the converting entity is filed and the date of the filing thereof.

e. 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 resulting entity has consented in writing to the conversion as required by this section.

f. A statement that the conversion was approved pursuant to this section and, if either the converting entity or the converted entity is a foreign entity, that the conversion was approved as required by the governing statute of such foreign entity.

(3) After the conversion has become effective in accordance with subsection (c), then, as provided in Section 10A-1-4.02(c)(4), all filing instruments with respect to the converted entity that would otherwise be required by this title to be delivered to the judge of probate for filing shall instead be delivered to the Secretary of State for filing.

(c) A conversion takes effect as follows:

(1) Upon the filing of the statement of conversion in accordance with Section 10A-1-4.02(c)(1), except as otherwise provided in subdivision (2).

(2) Upon any delayed effective date if, but only if, each of the following requirements is satisfied:

a. A delayed effective date is specified in the statement of conversion; and

b. If either the converted entity or the converting entity is a foreign entity, then any filing required under the governing statute of such foreign entity to effectuate the conversion is filed before the effective date specified in the statement of conversion.

(3) If a delayed effective date is specified, and the conditions of subdivision (2) are met, the conversion is effective at the close of business, unless a different hour is specified, on that date.

(d) Conversion has the following effects:

(1)a. Any other entity that has been converted pursuant to this article is for all purposes the same entity that existed before the conversion and the conversion shall constitute a continuation of the existence of the converting entity in the form of the converted entity. The conversion shall not be deemed to constitute a dissolution or termination of the converting entity.

b. If the Secretary of State has assigned a unique identifying number or other designation to the converting entity, that number or designation shall continue to be assigned to the converted entity.

(2)a. All property, real, personal, and mixed owned by the converting entity; all rights, immunities, and franchises of the converting entity, of a public as well as a private nature; and all debts or obligations due the converting entity, shall remain owned and held by, vested in, and due to, the converted entity, shall not be deemed to have been transferred to the converted entity as a consequence of the conversion, and shall not revert or be in any way impaired by reason of the conversion.

b. A certified copy of the statement of conversion may be filed in 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 the filing fees prescribed by Section 12-19-90. Any filing shall evidence chain of title, but lack of filing shall not affect the converted entity's title to the real property.

(3) All debts, obligations, and other liabilities of the converting entity shall continue as the debts, obligations, and liabilities of the converted entity and the converted entity shall continue to be responsible and liable for all the liabilities and obligations of the converting entity. Neither the rights of creditors, nor any liens upon the property of the converting entity, shall be impaired by the conversion, and an owner of the converted entity shall continue to be liable for all obligations of the converting entity for which the owner was personally liable before the conversion.

(4) Any claim existing or any action or proceeding of any kind pending by or against the converting entity shall be prosecuted or continued as if the conversion had not occurred.

(5) 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.

(6) 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.

(Act 2000-211, p. 279, §2; §10-15-3; amended and renumbered by Act 2009-513, p. 967, §71; Act 2014-293, §1.)