M&A Conditions Precedent Checklist - Alabama - Free Editor
M&A CONDITIONS PRECEDENT CHECKLIST
State of Alabama
Transaction Name: [________________________________]
Transaction Type: ☐ Stock Purchase ☐ Asset Purchase ☐ Statutory Merger ☐ Other: [________________________________]
Seller/Target: [________________________________]
Buyer/Acquirer: [________________________________]
Anticipated Closing Date: [__/__/____]
Definitive Agreement Date: [__/__/____]
Outside Date (Drop-Dead Date): [__/__/____]
Deal Counsel (Seller): [________________________________]
Deal Counsel (Buyer): [________________________________]
STATUS KEY:
- NS = Not Started
- IP = In Progress
- PC = Pending Counterparty
- PR = Pending Regulatory
- C = Complete
- W = Waived
- NA = Not Applicable
PART I: PRE-CLOSING CONDITIONS
A. Regulatory Approvals
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 1.1 | Hart-Scott-Rodino (HSR) Act filing (if transaction exceeds $126.4 million size-of-transaction threshold for 2025; 15 U.S.C. 18a) | ☐ Buyer ☐ Seller | [____] | [__/__/____] | Filing fee tiered by deal value |
| 1.2 | HSR waiting period expired or early termination granted | ☐ Buyer ☐ Seller | [____] | [__/__/____] | 30-day initial waiting period |
| 1.3 | Federal industry-specific regulatory approvals (e.g., FCC, FDIC, OCC, SEC, DOT) | [________________________________] | [____] | [__/__/____] | |
| 1.4 | Alabama state regulatory approvals (if applicable): | ||||
| ☐ Alabama Department of Insurance (change of control of insurer, Ala. Code 27-29-1 et seq.) | [________________________________] | [____] | [__/__/____] | ||
| ☐ Alabama State Banking Department (bank transactions) | [________________________________] | [____] | [__/__/____] | ||
| ☐ Alabama Public Service Commission (utility transfers) | [________________________________] | [____] | [__/__/____] | ||
| ☐ Alabama Alcoholic Beverage Control Board (liquor license transfers) | [________________________________] | [____] | [__/__/____] | ||
| ☐ Alabama Department of Environmental Management (ADEM permit transfers) | [________________________________] | [____] | [__/__/____] | ||
| ☐ Alabama Department of Revenue (tax clearance matters) | [________________________________] | [____] | [__/__/____] | ||
| 1.5 | CFIUS review/clearance (if foreign buyer; 50 U.S.C. 4565) | [________________________________] | [____] | [__/__/____] | |
| 1.6 | Other federal or state approvals: [________________________________] | [________________________________] | [____] | [__/__/____] |
B. Third-Party Consents
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 2.1 | Consent from counterparties to material contracts with change-of-control provisions | [________________________________] | [____] | [__/__/____] | List contracts in schedule |
| 2.2 | Landlord consents for assigned leases | [________________________________] | [____] | [__/__/____] | |
| 2.3 | Licensor consents for assigned IP licenses | [________________________________] | [____] | [__/__/____] | |
| 2.4 | Lender consents / waivers under credit facilities | [________________________________] | [____] | [__/__/____] | |
| 2.5 | Surety/bonding company consents | [________________________________] | [____] | [__/__/____] | |
| 2.6 | Customer consents (if required by contract) | [________________________________] | [____] | [__/__/____] | |
| 2.7 | Supplier consents (if required by contract) | [________________________________] | [____] | [__/__/____] | |
| 2.8 | Joint venture or partnership consents | [________________________________] | [____] | [__/__/____] | |
| 2.9 | Franchisor consent (if franchise agreement involved) | [________________________________] | [____] | [__/__/____] | |
| 2.10 | Government contract novation/assignment (FAR 42.12 if federal contracts; also confirm Alabama-specific government contract requirements) | [________________________________] | [____] | [__/__/____] |
C. Stockholder/Member Approvals
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 3.1 | Seller/Target stockholder approval of merger (Ala. Code 10A-2A-11.03 requires majority of votes entitled to be cast, unless articles require greater vote) | [________________________________] | [____] | [__/__/____] | |
| 3.2 | Buyer stockholder approval (if required by buyer's governing documents or applicable law) | [________________________________] | [____] | [__/__/____] | |
| 3.3 | Written consents in lieu of meeting obtained (if permitted under Ala. Code 10A-2A-7.04) | [________________________________] | [____] | [__/__/____] | |
| 3.4 | Dissenter/appraisal rights notices sent (Ala. Code 10A-2A-13.01 et seq.) | [________________________________] | [____] | [__/__/____] | |
| 3.5 | Dissenter/appraisal demand period expired or claims resolved | [________________________________] | [____] | [__/__/____] | |
| 3.6 | Short-form merger: parent owns at least 80% of outstanding shares of each class (Ala. Code 10A-2A-11.04) -- no subsidiary shareholder vote required | [________________________________] | [____] | [__/__/____] | If applicable |
PART II: SELLER'S CONDITIONS TO CLOSING (Conditions for Seller's Benefit)
A. Representations and Warranties Bring-Down
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 4.1 | Buyer's representations and warranties true and correct as of Closing Date (to applicable standard: ☐ in all respects ☐ in all material respects ☐ subject to MAE qualifier) | Buyer | [____] | [__/__/____] | |
| 4.2 | Buyer's officer certificate confirming accuracy of representations | Buyer | [____] | [__/__/____] |
B. Buyer's Covenants Performed
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 5.1 | Buyer has performed all covenants required to be performed on or before Closing | Buyer | [____] | [__/__/____] | |
| 5.2 | Buyer's officer certificate confirming performance of covenants | Buyer | [____] | [__/__/____] |
C. Other Seller Conditions
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 6.1 | No litigation or proceeding threatening Seller's ability to consummate transaction | Both | [____] | [__/__/____] | |
| 6.2 | Receipt of Buyer's closing deliverables (see Part VI) | Buyer | [____] | [__/__/____] | |
| 6.3 | Financing confirmed / evidence of available funds | Buyer | [____] | [__/__/____] |
PART III: BUYER'S CONDITIONS TO CLOSING (Conditions for Buyer's Benefit)
A. Representations and Warranties Bring-Down
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 7.1 | Seller's representations and warranties true and correct as of Closing Date (to applicable standard: ☐ in all respects ☐ in all material respects ☐ subject to MAE qualifier) | Seller | [____] | [__/__/____] | |
| 7.2 | Seller's officer certificate confirming accuracy of representations | Seller | [____] | [__/__/____] | |
| 7.3 | No Material Adverse Effect has occurred since date of definitive agreement | Seller | [____] | [__/__/____] |
B. Seller's Covenants Performed
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 8.1 | Seller has performed all covenants required to be performed on or before Closing | Seller | [____] | [__/__/____] | |
| 8.2 | Seller has complied with conduct-of-business covenant (interim operating covenants) | Seller | [____] | [__/__/____] | |
| 8.3 | Seller's officer certificate confirming performance of covenants | Seller | [____] | [__/__/____] |
C. No Material Adverse Change (MAC/MAE)
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 9.1 | No MAC/MAE has occurred with respect to the Target since the agreement date | Seller | [____] | [__/__/____] | Confirm MAE definition in agreement |
| 9.2 | No material damage or destruction to Target's assets | Seller | [____] | [__/__/____] |
D. Legal Opinions
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 10.1 | Legal opinion from Seller's counsel (authorization, enforceability, no conflicts) | Seller's Counsel | [____] | [__/__/____] | |
| 10.2 | Regulatory opinion(s) if required | [________________________________] | [____] | [__/__/____] |
E. Financial and Diligence Conditions
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 11.1 | Updated financial statements delivered (if required) | Seller | [____] | [__/__/____] | |
| 11.2 | Working capital estimate delivered | Seller | [____] | [__/__/____] | |
| 11.3 | No undisclosed liabilities discovered | Seller | [____] | [__/__/____] | |
| 11.4 | Environmental assessment complete (if required) | Buyer | [____] | [__/__/____] | |
| 11.5 | Buyer's financing confirmed (commitment letters, credit agreements executed) | Buyer | [____] | [__/__/____] | |
| 11.6 | Title search/commitment for real property (if applicable) | Buyer | [____] | [__/__/____] | |
| 11.7 | Lien search results satisfactory (UCC, tax, judgment) | Buyer | [____] | [__/__/____] |
F. Employee and Benefits Conditions
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 12.1 | Key employee retention/offer letters executed | Buyer | [____] | [__/__/____] | |
| 12.2 | Section 280G analysis complete (if C-corp target; excess parachute payments) | Seller | [____] | [__/__/____] | |
| 12.3 | 280G shareholder approval vote obtained (if applicable) | Seller | [____] | [__/__/____] | |
| 12.4 | Employee benefit plan transition schedule agreed | Both | [____] | [__/__/____] | |
| 12.5 | COBRA continuation coverage notices prepared | Seller | [____] | [__/__/____] | |
| 12.6 | Workers' compensation insurance confirmed for post-closing | Buyer | [____] | [__/__/____] |
G. Insurance / RWI Conditions (if Applicable)
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 13.1 | Representations and Warranties Insurance (RWI) policy bound | ☐ Buyer ☐ Seller | [____] | [__/__/____] | |
| 13.2 | RWI binder/policy terms reviewed; exclusions acceptable | Both | [____] | [__/__/____] | |
| 13.3 | Retention amount and subrogation language aligned with indemnity provisions | Both | [____] | [__/__/____] | |
| 13.4 | No-claims declaration delivered | Seller | [____] | [__/__/____] | |
| 13.5 | Broker engagement letter executed | ☐ Buyer ☐ Seller | [____] | [__/__/____] | |
| 13.6 | Tail D&O/E&O/cyber insurance policies quoted and ready to bind | Seller | [____] | [__/__/____] |
PART IV: MUTUAL CONDITIONS TO CLOSING
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 12.1 | No injunction, restraining order, or decree preventing consummation | Both | [____] | [__/__/____] | |
| 12.2 | No law enacted or pending that prohibits the transaction | Both | [____] | [__/__/____] | |
| 12.3 | All required regulatory approvals obtained (see Part I.A) | Both | [____] | [__/__/____] | |
| 12.4 | All required third-party consents obtained (see Part I.B) | Both | [____] | [__/__/____] | |
| 12.5 | All required stockholder/member approvals obtained (see Part I.C) | Both | [____] | [__/__/____] | |
| 12.6 | HSR waiting period expired or terminated (if applicable) | Both | [____] | [__/__/____] | |
| 12.7 | No governmental litigation or investigation threatening transaction | Both | [____] | [__/__/____] |
PART V: ALABAMA-SPECIFIC REQUIREMENTS
A. State Merger Filings (Statutory Merger Transactions)
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 13.1 | Prepare Certificate of Merger / Statement of Merger per Ala. Code 10A-1-8.02 (entity mergers) and 10A-2A-11.05 (corporation-specific) | Deal Counsel | [____] | [__/__/____] | |
| 13.2 | Certificate/Statement of Merger must include: name, type, and jurisdiction of each merging entity; statement that merger was approved as required; name of surviving entity; effective date | Deal Counsel | [____] | [__/__/____] | Per 10A-1-8.02 |
| 13.3 | Certificate signed by authorized officer or representative of each merging entity | Both | [____] | [__/__/____] | |
| 13.4 | File Certificate of Merger with Alabama Secretary of State, P.O. Box 5616, Montgomery, AL 36103-5616 | Deal Counsel | [____] | [__/__/____] | Filing fee: $100 per Ala. Code 10A-1-4.31 |
| 13.5 | Receive filed-stamped copy from Secretary of State | Deal Counsel | [____] | [__/__/____] | |
| 13.6 | Short-form merger (parent owns at least 80% of outstanding shares of each class, Ala. Code 10A-2A-11.04): board resolution of parent; no subsidiary shareholder vote | Deal Counsel | [____] | [__/__/____] | |
| 13.7 | If non-surviving entity is a foreign entity qualified in Alabama, file certificate of withdrawal | Deal Counsel | [____] | [__/__/____] |
B. Alabama Good Standing and Entity Status
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 14.1 | Obtain Certificate of Existence/Good Standing for Seller/Target from Alabama Secretary of State | Seller | [____] | [__/__/____] | Phone: (334) 242-7200 |
| 14.2 | Obtain Certificate of Good Standing for Buyer from its state of organization | Buyer | [____] | [__/__/____] | |
| 14.3 | Confirm Seller/Target annual report is current with Secretary of State | Seller | [____] | [__/__/____] | |
| 14.4 | Confirm no administrative dissolution or revocation pending | Seller | [____] | [__/__/____] | |
| 14.5 | If Buyer is a foreign entity, confirm qualification to transact business in Alabama (Ala. Code 10A-2A-15.01) | Buyer | [____] | [__/__/____] |
C. Alabama Tax Matters
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 15.1 | Alabama Department of Revenue -- corporate income tax clearance or final return (Ala. Code 40-18-1 et seq.) | Seller | [____] | [__/__/____] | Alabama imposes corporate income tax |
| 15.2 | Alabama business privilege tax obligations current (Ala. Code 40-14A-1 et seq.) | Seller | [____] | [__/__/____] | Annual privilege tax based on net worth |
| 15.3 | Alabama Department of Revenue -- sales/use tax clearance (if asset sale involving inventory or tangible personal property) | Seller | [____] | [__/__/____] | |
| 15.4 | Local county/municipality business license and tax clearance | Seller | [____] | [__/__/____] | Alabama counties impose occupational taxes |
| 15.5 | Real property transfer tax (deed recording tax, Ala. Code 40-22-1): $0.50 per $500 of consideration for real property transfers | Seller/Buyer | [____] | [__/__/____] | If real property conveyed |
| 15.6 | Alabama unemployment compensation tax obligations current (Ala. Code 25-4-1 et seq.) | Seller | [____] | [__/__/____] |
D. Alabama-Specific Licensing and Permits
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 16.1 | Transfer or re-issuance of Alabama business license(s) (county-level) | [________________________________] | [____] | [__/__/____] | Alabama has no state business license; licenses are county-based |
| 16.2 | Transfer of professional or occupational licenses (if applicable) | [________________________________] | [____] | [__/__/____] | |
| 16.3 | Transfer of ADEM environmental permits | [________________________________] | [____] | [__/__/____] | |
| 16.4 | Transfer of Alabama Liquor Control Board licenses (if applicable) | [________________________________] | [____] | [__/__/____] | |
| 16.5 | Transfer of Alabama healthcare facility licenses (if applicable; Alabama Department of Public Health) | [________________________________] | [____] | [__/__/____] | |
| 16.6 | Alabama contractor's license transfer (if applicable; Alabama Licensing Board for General Contractors) | [________________________________] | [____] | [__/__/____] |
E. Bulk Sales Considerations
| # | Condition | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 17.1 | Alabama has repealed UCC Article 6 (Bulk Transfers); no general bulk sales law compliance required | N/A | N/A | N/A | |
| 17.2 | If asset purchase, confirm no creditor notification obligations under contract or other applicable law | Deal Counsel | [____] | [__/__/____] | |
| 17.3 | Confirm no industry-specific bulk transfer requirements (e.g., healthcare, banking) | Deal Counsel | [____] | [__/__/____] |
PART VI: CLOSING DELIVERABLES CHECKLIST
A. Seller's Closing Deliverables
| # | Deliverable | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 18.1 | Executed definitive agreement (or confirmation of prior execution) | Seller | [____] | [__/__/____] | |
| 18.2 | Officer's certificate (re: reps, warranties, covenants) | Seller | [____] | [__/__/____] | |
| 18.3 | Secretary's certificate (articles of incorporation, bylaws, resolutions, incumbency) | Seller | [____] | [__/__/____] | |
| 18.4 | Certificate of Existence/Good Standing from Alabama Secretary of State (dated within [____] days of Closing) | Seller | [____] | [__/__/____] | |
| 18.5 | Board resolutions authorizing the transaction | Seller | [____] | [__/__/____] | |
| 18.6 | Stockholder/member approval documentation | Seller | [____] | [__/__/____] | |
| 18.7 | FIRPTA certificate (IRC 1445; non-foreign affidavit) | Seller | [____] | [__/__/____] | |
| 18.8 | IRS Form W-9 (Seller) | Seller | [____] | [__/__/____] | |
| 18.9 | Stock certificates (endorsed or with stock powers) / membership interest assignments | Seller | [____] | [__/__/____] | Stock purchase only |
| 18.10 | Bill of Sale | Seller | [____] | [__/__/____] | Asset purchase only |
| 18.11 | Assignment and Assumption Agreement | Both | [____] | [__/__/____] | Asset purchase only |
| 18.12 | IP Assignment Agreement(s) | Seller | [____] | [__/__/____] | |
| 18.13 | Real property deeds (warranty deed or special warranty deed) | Seller | [____] | [__/__/____] | Record in county probate office |
| 18.14 | Vehicle title transfers (Alabama Department of Revenue, Motor Vehicle Division) | Seller | [____] | [__/__/____] | |
| 18.15 | Domain name transfer documentation | Seller | [____] | [__/__/____] | |
| 18.16 | Payoff letters from Seller's lenders | Seller | [____] | [__/__/____] | |
| 18.17 | UCC-3 termination statements (lien releases) | Seller | [____] | [__/__/____] | File with Alabama Secretary of State |
| 18.18 | Executed non-competition/non-solicitation agreements | Seller/Key Employees | [____] | [__/__/____] | Alabama enforces reasonable non-competes |
| 18.19 | Executed employment/consulting agreements with key employees | Seller/Key Employees | [____] | [__/__/____] | |
| 18.20 | Executed transition services agreement (if applicable) | Both | [____] | [__/__/____] | |
| 18.21 | Escrow agreement (if applicable) | Both | [____] | [__/__/____] | |
| 18.22 | Legal opinion of Seller's counsel | Seller's Counsel | [____] | [__/__/____] | |
| 18.23 | Resignations of directors and officers (as agreed) | Seller | [____] | [__/__/____] | |
| 18.24 | Landlord estoppels and SNDAs | Seller | [____] | [__/__/____] | |
| 18.25 | Tax allocation schedule (asset purchase, IRC 1060) | Both | [____] | [__/__/____] | |
| 18.26 | Section 280G analysis and shareholder vote (if applicable, C-corp target) | Seller | [____] | [__/__/____] |
B. Buyer's Closing Deliverables
| # | Deliverable | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 19.1 | Purchase price payment (by wire transfer of immediately available funds) | Buyer | [____] | [__/__/____] | |
| 19.2 | Officer's certificate (re: reps, warranties, covenants) | Buyer | [____] | [__/__/____] | |
| 19.3 | Secretary's certificate (articles, bylaws, resolutions, incumbency) | Buyer | [____] | [__/__/____] | |
| 19.4 | Certificate of Good Standing from Buyer's state of organization | Buyer | [____] | [__/__/____] | |
| 19.5 | Board resolutions authorizing the transaction | Buyer | [____] | [__/__/____] | |
| 19.6 | Assumption Agreement (asset purchase) | Buyer | [____] | [__/__/____] | |
| 19.7 | Executed escrow agreement (if applicable) | Buyer | [____] | [__/__/____] | |
| 19.8 | Evidence of financing (executed credit agreement, funding confirmation) | Buyer | [____] | [__/__/____] | |
| 19.9 | Solvency certificate (if debt financing involved) | Buyer | [____] | [__/__/____] | |
| 19.10 | Legal opinion of Buyer's counsel (if required) | Buyer's Counsel | [____] | [__/__/____] | |
| 19.11 | Executed ancillary agreements (employment, TSA, non-compete) | Buyer | [____] | [__/__/____] |
C. Funds Flow and Payment
| # | Deliverable | Responsible | Status | Target Date | Notes |
|---|---|---|---|---|---|
| 20.1 | Funds flow memorandum executed by all parties | Both | [____] | [__/__/____] | |
| 20.2 | Wire transfer instructions confirmed | Both | [____] | [__/__/____] | |
| 20.3 | Escrow agent funding letter (if escrow) | Escrow Agent | [____] | [__/__/____] | |
| 20.4 | Payoff wires sent to Seller's lenders | Buyer | [____] | [__/__/____] | |
| 20.5 | Net purchase price wire sent to Seller | Buyer | [____] | [__/__/____] | |
| 20.6 | Working capital adjustment estimate delivered | Seller | [____] | [__/__/____] | |
| 20.7 | Transaction expense fund distributed | Both | [____] | [__/__/____] |
PART VII: POST-CLOSING CONDITIONS AND OBLIGATIONS
| # | Obligation | Responsible | Deadline | Status | Notes |
|---|---|---|---|---|---|
| 21.1 | Working capital true-up (per agreement timeline, typically 60-90 days) | Both | [__/__/____] | [____] | |
| 21.2 | Earnout payments (if applicable, per milestones) | Buyer | Per Agreement | [____] | |
| 21.3 | Post-closing purchase price adjustment | Both | [__/__/____] | [____] | |
| 21.4 | File Certificate of Merger with Alabama Secretary of State (if not filed at closing) | Deal Counsel | [__/__/____] | [____] | |
| 21.5 | File updated annual report reflecting new ownership (if entity continues) | Buyer | [__/__/____] | [____] | |
| 21.6 | Update county business licenses | Buyer | [__/__/____] | [____] | |
| 21.7 | Customer/supplier notification letters sent | Buyer | [__/__/____] | [____] | |
| 21.8 | Employee benefit plan transitions completed | Buyer | [__/__/____] | [____] | |
| 21.9 | COBRA notices issued (if applicable) | Seller | [__/__/____] | [____] | |
| 21.10 | Tail insurance policies bound (D&O, E&O, cyber) | Seller | [__/__/____] | [____] | |
| 21.11 | Data room archived and access terminated | Both | [__/__/____] | [____] | |
| 21.12 | Transition services completed per TSA schedule | Both | Per TSA | [____] | |
| 21.13 | Indemnification claims (if any) submitted per agreement | Both | Per Agreement | [____] | |
| 21.14 | Escrow release (per escrow agreement timeline) | Escrow Agent | [__/__/____] | [____] | |
| 21.15 | Final closing binder assembled and distributed | Deal Counsel | [__/__/____] | [____] | |
| 21.16 | Record real property deeds in applicable county probate office | Deal Counsel | [__/__/____] | [____] |
PART VIII: PRACTICE NOTES -- ALABAMA-SPECIFIC
Key Alabama Considerations
-
Two-Chapter Framework: Alabama's merger law is found in two places: (a) the Alabama Business Corporation Law, Ala. Code 10A-2A (Chapter 2A), which replaced the former Chapter 2 effective January 1, 2020, via Act 2019-94; and (b) the general entity merger provisions in Ala. Code 10A-1-8.02. Ensure you are working under the correct chapter.
-
Filing Office: All merger certificates are filed with the Alabama Secretary of State, P.O. Box 5616, Montgomery, AL 36103-5616. Phone: (334) 242-7200.
-
Filing Fee: The filing fee for a Certificate/Statement of Merger is $100 per Ala. Code 10A-1-4.31.
-
Shareholder Approval: Under Ala. Code 10A-2A-11.03, a merger plan must be approved by a majority of votes entitled to be cast by each voting group. Review the articles for any supermajority requirements.
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Short-Form Merger: Under Ala. Code 10A-2A-11.04, a parent corporation owning at least 80% of the outstanding shares of each class of a subsidiary may merge the subsidiary into itself without shareholder approval of either entity. Note: the 80% threshold is higher than the 90% threshold in many other states.
-
Dissenters' Rights: Alabama provides appraisal rights under Ala. Code 10A-2A-13.01 et seq. Shareholders who dissent from a merger are entitled to receive payment for the fair value of their shares. Proper notice and demand procedures must be followed strictly.
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No Bulk Sales Act: Alabama has repealed UCC Article 6 (Bulk Transfers). There is no general bulk sales compliance obligation in Alabama.
-
Business Privilege Tax: Alabama imposes a business privilege tax on entities doing business in the state (Ala. Code 40-14A-1 et seq.), based on net worth. Ensure this obligation is current before closing.
-
Deed Recording Tax: Alabama imposes a deed recording tax of $0.50 per $500 of consideration on transfers of real property (Ala. Code 40-22-1). Factor this into closing costs for asset deals involving real estate.
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County-Level Business Licenses: Alabama does not have a state-level general business license. Business licenses are issued at the county and municipal level. Ensure all local license transfers are addressed.
-
Non-Competition Agreements: Alabama enforces reasonable non-competition agreements. However, Alabama has a protectable interest statute (Ala. Code 8-1-190 et seq.) that defines the requirements for enforceable restrictive covenants.
Common Pitfalls
- Using the old Chapter 2 citation (10A-2) instead of the current Chapter 2A (10A-2A) for corporation merger provisions
- Overlooking the 80% threshold for short-form mergers (higher than many states' 90% threshold)
- Failing to address county-level occupational taxes and business licenses
- Not accounting for the business privilege tax as a separate obligation from corporate income tax
- Overlooking deed recording tax on real property transfers in asset deals
- Forgetting to withdraw foreign entity qualification after merger (if disappearing entity was foreign-qualified)
- Not addressing successor liability for county occupational taxes
RWI and Insurance Considerations
- D&O tail policies should be bound at or before closing. Typical tail period is 6 years.
- Confirm RWI policy covers Alabama-specific representations and does not exclude state-specific regulatory matters.
- For transactions involving real property, confirm environmental liability coverage under the RWI policy or obtain separate environmental insurance.
- Alabama workers' compensation insurance must be confirmed for post-closing operations.
Timing and Scheduling Notes
- Alabama Secretary of State processes filings within approximately 5-10 business days
- Expedited processing may be available; contact Secretary of State at (334) 242-7200
- HSR filing (if applicable): 30-day waiting period from date of filing
- FTB/tax clearance: allow adequate time for Alabama Department of Revenue to process any tax clearance requests
- Dissenter's rights demand period must be factored into the timeline
SOURCES AND REFERENCES
- Alabama Business Corporation Law (Chapter 2A): Ala. Code 10A-2A
- Alabama Entity Mergers: Ala. Code 10A-1-8.02
- Alabama Secretary of State -- Business Entities: sos.alabama.gov
- Alabama Filing Fees: Ala. Code 10A-1-4.31
- Alabama Secretary of State Fee Schedule: sos.alabama.gov
- Hart-Scott-Rodino Act, 15 U.S.C. 18a; 2025 thresholds: ftc.gov
- Alabama Dissenters' Rights: Ala. Code 10A-2A-13.01 et seq.
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