Ala. Code § 10A-3A-10.03

Current through the 2024 Regular Session.

Section 10A-3A-10.03 - Disposition of assets in a nonmembership nonprofit corporation

In a nonmembership nonprofit corporation:

(a) Unless the certificate of incorporation otherwise provides:

(1) a sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, the property and assets of the nonmembership nonprofit corporation may be approved by the board of directors; and

(2) a sale, lease, exchange, mortgage, pledge, or other disposition of all, or substantially all, of the property and assets of the nonmembership nonprofit corporation approved by the board of directors under this section must also be approved by that person or group of persons whose approval is required by the certificate of incorporation in accordance with Section 10A-3A-10.04.

(b) Unless the certificate of incorporation otherwise provides, without limiting the rights of a secured party under applicable law, no approval by any person or group of persons specified in the certificate of incorporation shall be required by this section for a sale, lease, exchange, or other disposition of any of the nonmembership nonprofit corporation's assets if those assets are mortgaged, pledged, dedicated to the repayment of indebtedness, or otherwise encumbered for the benefit of a secured party or other creditor and either:

(1) The secured party or other creditor exercises its rights under the law governing the mortgage, pledge, dedication, or encumbrance, or other applicable law, whether under the Uniform Commercial Code, a real property law, or other law, to effect the sale, lease, exchange, or other disposition of those assets without the consent of the nonmembership nonprofit corporation; or

(2) In lieu of the secured party or other creditor exercising such rights, the board of directors of the nonmembership nonprofit corporation authorizes an alternative sale, lease, exchange, or other disposition of those assets, whether with the secured party or other creditor, that results in the reduction or elimination of the total liabilities or obligations secured by those assets, provided that (i) the value of those assets is less than or equal to the total amount of the liabilities or obligations being eliminated or reduced and (ii) the sale, lease, exchange, or other disposition of those assets is not prohibited by the law governing the mortgage, pledge, dedication, or encumbrance. The provision of consideration to the nonmembership nonprofit corporation shall not create a presumption that the value of the assets is greater than the total amount of the liabilities or obligations being eliminated or reduced.

(c) A failure to satisfy the condition in subsection (b)(2)(i) shall not result in the invalidation of a sale, lease, exchange, or other disposition of the nonmembership nonprofit corporation's assets if the transferee of those assets (i) provided value therefor (which may include the reduction or elimination of the total liabilities or obligations secured by those assets) and (ii) acted in good faith (as defined in Section 7-1-201(b)). The preceding sentence shall not apply to a proceeding against the nonmembership nonprofit corporation and any other necessary parties to enjoin the sale, lease, exchange, or other disposition of the nonmembership nonprofit corporation's assets before the consummation thereof and shall not eliminate any liability for monetary damages for any claim, including a claim in the right of the nonmembership nonprofit corporation, based upon a violation of a duty by a current or former director or officer, or other person.

(d) A provision of the certificate of incorporation that requires the authorization or consent of any person or group of persons specified in the certificate of incorporation for a sale, lease, exchange, or other disposition of the nonmembership nonprofit corporation's assets shall not apply to a transaction permitted by subsection (b) unless that provision expressly so requires.

Ala. Code § 10A-3A-10.03 (1975)

Amended by Act 2024-413,§ 1, eff. 8/1/2024.

Added by Act 2023-503,§ 1, eff. 1/1/2024.