Corporate Sale of Substantially All Assets Approval Requirements in Alabama

At a glance

Requirements one by one

Alabama uses significant activity and attributes subsidiary assets

Ala. Code § 10A-2A-12.02(a) applies when a non-exempt disposition would leave the corporation without significant continuing business activity. It does not state an independent all-or-substantially-all formula.

The conclusive safe harbor requires both at least 25% of prior-fiscal-year total assets and at least 25% of either continuing pretax income or continuing revenue, measured for the corporation and subsidiaries on a consolidated basis. Subsection (h) separately treats the property and assets of every wholly owned and directly or indirectly controlled subsidiary as corporate property and assets. Falling outside the safe harbor does not itself answer the qualitative significant-activity question.

The board authorizes, recommends, and may set conditions

The board first adopts a resolution authorizing the disposition and ordinarily recommends stockholder approval. It may make no recommendation because of conflicts or special circumstances, and informs stockholders why. Ala. Code § 10A-2A-8.26 also permits the corporation to agree to submit after the board decides it no longer recommends the matter. The board may condition stockholder approval or transaction effectiveness.

Every stockholder receives the commercial terms

Section 10A-2A-12.02(d) requires notice to every stockholder whether or not entitled to vote. It identifies considering the disposition as a meeting purpose and describes the disposition, including its terms, conditions, and the consideration the corporation will receive. Ala. Code § 10A-2A-7.05 supplies the 10-to-60-day meeting interval.

Written consent under § 10A-2A-7.04 defaults to the vote needed at an all-present meeting and uses a 60-day collection period. Nonvoters and nonconsenting voters receive the action description and meeting-equivalent materials no more than 10 days after the sufficient consents arrive or permitted later tabulation ends.

Quorum and approval are different calculations

Under § 10A-2A-12.02(e), the meeting requires a quorum consisting of a majority of the votes entitled to be cast unless the certificate or a board condition requires a greater vote or quorum. With the quorum present, Ala. Code § 10A-2A-7.25(c) approves the voting-group action when votes cast favoring exceed votes cast opposing, unless the certificate requires more. The disposition section states no automatic separate voting-group vote or lower quorum route.

The exemptions include secured-creditor and subsidiary routes

Section 10A-2A-12.01 ordinarily removes usual-course dispositions of any or all assets, any-course encumbrances, transfers to wholly owned entities, and pro rata asset distributions from stockholder approval. The certificate can opt into approval, but an encumbered-asset provision must expressly reach the secured- creditor routes.

A secured party may exercise applicable-law rights without corporate consent. Alternatively, the board may authorize a disposition that reduces or eliminates secured obligations when asset value is no greater than those obligations and the governing law does not prohibit it. A disposition in dissolution is outside § 10A-2A-12.02.

Approval can be abandoned before consummation

After stockholder approval and before consummation, § 10A-2A-12.02(f) allows the corporation to abandon without another stockholder action, subject to other parties' contractual rights. Article 12 states no separate public filing for the asset disposition.

Appraisal eligibility has transaction-specific opt-outs

Section 10A-2A-13.02 ordinarily gives an eligible voter appraisal upon consummation of a § 10A-2A-12.02 disposition. The right can disappear for the specified non-interested cash/net-assets distribution within one year or when the certificate opts out; securities-market, 2,000-record-holder, open-end-fund, consideration, interested-transaction, and preferred-stock provisions add other boundaries.

Ala. Code § 10A-2A-13.20 requires the meeting notice to state whether the corporation concludes appraisal is, is not, or may be available. Under § 10A-2A-13.21, a claimant gives written intent before the vote and does not vote in favor. If the action becomes effective, § 10A-2A-13.22 requires the corporation to send its appraisal notice and form no later than 10 days afterward; the response date is 40 to 60 days after notice is sent.

Good-faith secured-sale protection preserves claims

If the board's alternative secured-asset sale misses the asset-value condition, § 10A-2A-12.01(c) can still protect a transferee that gave value and acted in good faith. That protection does not bar a preconsummation injunction and does not eliminate duty-based monetary-damages claims. It does not decide successor- liability, creditor-priority, fiduciary, tax, securities, antitrust, employment, environmental, licensing, or regulatory law.

What trips people up

• Quorum is not the approval threshold. A majority of entitled votes must be represented, but the ordinary approval rule is votes cast for exceeding votes cast against.
• Subsidiary assets are attributed. A wholly owned controlled entity's property and assets enter the corporation-level significant-activity analysis.
• The safe harbor is AND plus either/or. Retained assets must reach 25%, and either continuing pretax income or continuing revenue must also reach 25%.

Common questions

Must the notice describe consideration?

Yes. Section 10A-2A-12.02(d) requires the description to include terms, conditions, and consideration to be received by the corporation.

May the corporation distribute assets pro rata without this vote?

Ordinarily yes under § 10A-2A-12.01(a)(4), unless the certificate of incorporation requires stockholder approval.

Can the corporation abandon after stockholder approval?

Yes, before consummation and without another stockholder action, subject to other parties' contractual rights.

Statutes and sources

• Ala. Code §§ 10A-2A-7.04, -7.05, -7.25, and -8.26 — written consent, meeting notice, quorum/vote, and agreed submission after withdrawn recommendation. Official ALISON § 10A-2A-7.25 text, accessed September 5, 2026.
• Ala. Code §§ 10A-2A-12.01 to -12.02 — exemptions, significant-activity trigger and safe harbor, subsidiary attribution, board action, notice, vote, and abandonment. Official ALISON § 10A-2A-12.02 text, accessed September 5, 2026.
• Ala. Code §§ 10A-2A-13.02 and -13.20 to -13.22 — appraisal eligibility, limits, notices, and response timing. Official ALISON § 10A-2A-13.02 text, accessed September 5, 2026.