USA – ALABAMA Law and Practice Contributed by: Adam J. Sigman, Crystal H. Walls, Nathan Stotser, Katie Sinclair and Courtney Bradshaw, Dentons
5.5 Applicable Governance Requirements LP Governance
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. See Section 10A-10-1.13. REITs organised under Alabama law (Section 10A-10-1.01 to -1.24) should file their declara - tion 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 Section 10A-10-1.11 regarding annual report requirements and submission require - ments to shareholders. 5.4 Minimum Capital Requirement There is no minimum capital requirement, though a nominal amount such as USD100 is common.
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 - ardising 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 member’s vote as set forth in the limited liability company agreement. The other structure is “manager-managed” LLC, in which a person or entity is designated as the manager with decision-making rights as set forth in the limited liability company agreement. Members who are not managers often retain the right to consent to certain major decisions. A manager can be one person or several persons each having the ability to act independently or being required to act by majority, supermajor - ity or unanimous vote, depending on the nature of the decision and the relative weight of each member’s vote as set forth in the limited liability company agreement.
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