USA - ALABAMA Law and Practice Contributed by: Adam J. Sigman, Crystal H. Walls, Nathan Stotser and Katie Sinclair, Dentons
comes. Both types of agreement will generally have provisions allowing for certain owners to buy the interests of other owners or to have the assets sold under certain circumstances. Corporate Statutes and Judicial Decisions Many activities of corporations, including REITs, are governed by Alabama corporate statutes and judicial decisions. In closely held corpora - tions, the owners (shareholders) may enter into a shareholders’ agreement, which establishes, among other things, how votes are cast and how interests in the corporation may be bought and sold or otherwise transferred. Economic distributions within corporations are generally less flexible than distributions within LPs and LLCs. Each share in the same class of ownership shares is entitled to the identical economic distribution as each other share in that class. In order to allocate economics in a corpo - ration differently among shareholders, multiple classes of shares must be created with different priorities of payments and claims on a corpora - tion’s distributions. 5.3 REITs REITs are corporations or business trusts that elect for REIT status, allowing them to pass income through to their owners, like LPs and LLCs; however, because of the complex qualifi - cations required of REITs under the US tax code, investments in REITs are normally limited to large income-producing assets or portfolios of assets. Many REITs are formed as Maryland corpora - tions. A REIT must pay the same filing fees as other Alabama entities required under Section 10A-1- 4.31. When computing such fees under this Sec - tion, a REIT should treat its declaration of trust
in the same manner as a certificate of formation. Section 10A-10-1.13. REITs organized under Alabama law (Section 10A-10-1.01 to -1.24) should file its declaration of trust in the same manner as the certificate of formation of an Alabama domestic filing entity. Section 10A-10-1.06 identifies the requirements of a declaration of trust, and Section 10A-10- 1.07 sets forth the division of classes of REIT shares permitted by Alabama law. REITs should follow 10A-10-1.11 regarding annual report requirements and submission requirements to shareholders. 5.4 Minimum Capital Requirement There is no minimum capital requirement, though a nominal amount such as USD100 is common. 5.5 Applicable Governance The governance structure of an LP is set out in the agreement of limited partnership, and gener - ally provides that most decisions be made by the general partner. Alabama law allows certain vot - ing rights for the limited partners without jeop - ardizing their status as limited partners; however, one reason why limited partners do not have lia - bility for the obligations of an LP is because they generally do not have control of the day-to-day activities of the partnership. LLC Governance In an LLC, there are two types of governance structure. One is the “member-managed” structure, where the members are responsible for managing the LLC, making decisions by majority, supermajor - ity or unanimous vote, depending on the nature of the decision and the relative weight of each Requirements LP Governance
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