Code of Alabama - Title 10A: Alabama Business and Nonprofit Entities Code - Section 10A-2A-7.32 - Stockholder agreements

Section 10A-2A-7.32 - Stockholder agreements.

(a) An agreement among the stockholders of a corporation that complies with this section is effective among the stockholders and the corporation even though it is inconsistent with one or more other provisions of this chapter in that it:

(1) eliminates the board of directors or restricts the discretion or powers of the board of directors;

(2) governs the authorization or making of distributions, regardless of whether they are in proportion to ownership of stock, subject to the limitations in Section 10A-2A-6.40;

(3) establishes who shall be directors or officers of the corporation, or their terms of office or manner of selection or removal;

(4) governs, in general or in regard to specific matters, the exercise or division of voting power by or between the stockholders and directors or by or among any of them, including use of weighted voting rights or director proxies;

(5) establishes the terms and conditions of any agreement for the transfer or use of property or the provision of services between the corporation and any stockholder, director, officer or employee of the corporation or among any of them;

(6) transfers to one or more stockholders or other persons all or part of the authority to exercise the corporate powers or to manage the business and affairs of the corporation, including the resolution of any issue about which there exists a deadlock among directors or stockholders;

(7) requires dissolution of the corporation at the request of one or more of the stockholders or upon the occurrence of a specified event or contingency; or

(8) otherwise governs the exercise of the corporate powers or the management of the business and affairs of the corporation or the relationship among the stockholders, the directors and the corporation, or among any of them, and is not contrary to public policy.

(b) An agreement authorized by this section shall be:

(1) as set forth (i) in the certificate of incorporation or bylaws and approved by all persons who are stockholders at the time of the agreement, or (ii) in a written agreement that is signed by all persons who are stockholders at the time of the agreement and is made known to the corporation; and

(2) subject to amendment only by all persons who are stockholders at the time of the amendment, unless the agreement provides otherwise.

(c) The existence of an agreement authorized by this section shall be noted conspicuously on the front or back of each certificate for outstanding stock or in the information required by Section 10A-1-3.45. If at the time of the agreement the corporation has stock outstanding represented by certificates, the corporation shall recall the outstanding certificates and issue substitute certificates that comply with this subsection. The failure to note the existence of the agreement as required by this subsection shall not affect the validity of the agreement or any action taken pursuant to it. Any purchaser of stock who, at the time of purchase, did not have knowledge of the existence of the agreement shall be entitled to rescission of the purchase. A purchaser shall be deemed to have knowledge of the existence of the agreement if its existence is noted on the certificate or if the stock is not represented by a certificate, the information required by Section 10A-1-3.45 is delivered to the purchaser at or before the time of purchase of the stock. An action to enforce the right of rescission authorized by this subsection shall be commenced within the earlier of 90 days after discovery of the existence of the agreement or two years after the time of purchase of the stock.

(d) If the agreement ceases to be effective for any reason, the board of directors may, if the agreement is contained or referred to in the corporation's certificate of incorporation or bylaws, adopt an amendment to the certificate of incorporation or bylaws, without stockholder action, to delete the agreement and any references to it.

(e) An agreement authorized by this section that limits the discretion or powers of the board of directors shall relieve the directors of, and impose upon the person or persons in whom the discretion or powers are vested, liability for acts or omissions imposed by law on directors to the extent that the discretion or powers of the directors are limited by the agreement. An agreement authorized by this section that eliminates the board of directors shall impose on the person or persons in whom the discretion or powers of the directors are vested the liability for acts or omissions as are imposed by law on directors.

(f) The existence or performance of an agreement authorized by this section shall not be a ground for imposing personal liability on any stockholder for the acts or debts of the corporation even if the agreement or its performance treats the corporation as if it were a partnership or results in failure to observe the corporate formalities otherwise applicable to the matters governed by the agreement.

(g) Incorporators or subscribers for stock may act as stockholders with respect to an agreement authorized by this section if no stock has been issued when the agreement is made.

(h) Limits, if any, on the duration of an agreement authorized by this section must be set forth in the agreement.

(Act 2019-94, §1.)

Last modified: May 3, 2021