Alabama Professional Corporation for Medical Doctors Law

Corporations – Professional Corporation – Alabama

CODE OF ALABAMA, §§ 10-2B-101 through 10-2B-17.03 (Alabama Business Corporation Act)

CODE OF ALABAMA, §§ 10-4-380 through 10-4-406 (Revised Alabama Professional Corporation Act)

CODE OF ALABAMA, title 34, Chapter 24 (Physicians and Other Practitioners of the Healing Arts)

The practice of medicine in the State of Alabama as a professional corporation is controlled statutorily by the Alabama Business Corporation Act and the Revised Alabama Professional Corporation Act (hereinafter the “Act”). When there are inconsistent provisions in the two acts, the provisions of the Professional Corporation Act prevail.

Additionally, a professional corporation organized to engage in the practice of medicine is governed by the various rules and regulations of the Alabama State Board of Medical Examiners.

The following definitions are set out in the Act:

1. A professional service is any service which may lawfully be performed only pursuant to a license issued by a state court, state regulatory licensing board or other like agency pursuant to state laws.

2. The licensing authority is the state court, state regulatory licensing board or other like agency which has the power to issue a license or other legal authorization to render professional services.

3. A qualified person is

1. An individual who is authorized by law of Alabama or of any qualified state to render a professional service permitted by the articles of incorporation of such professional corporation;

2. A general partnership in which all the partners are qualified persons with respect to such corporation; and

3. A professional corporation in which all the shareholders are qualified persons with respect to the professional corporation.

“Qualified person” does not include any person during any period in which such person’s authorization to render professional services has been completely terminated or suspended.

Professional corporations may be organized only for the purpose of rendering professional services and services ancillary thereto within a single profession.

A professional corporation has all the powers necessary or convenient to effectuate its purposes, including those enumerated in the Alabama Business Corporation Act.

A professional corporation may not engage in any profession other than the profession permitted by its articles of incorporation, except that a professional corporation may invest its funds in real estate, mortgages, stocks, bonds, or any other type investment.

A professional corporation may render professional services in Alabama only through individuals permitted to render such services in Alabama.

The name of a professional corporation authorized to transact business in Alabama:

1. Must contain the words “professional corporation” or the abbreviation “P.C.”

2. May not contain any word or phrase which indicates or implies that it is organized for any purpose other than the purposes contained in its articles of incorporation.

3. May not be the same as, or deceptively similar to, the name of any corporation or professional association existing under the laws of Alabama or any foreign corporation authorized to transact business in Alabama, or a name the exclusive right to which is, at the time, reserved in the manner provided in the Alabama Business Corporation Act, or the name of a corporation which has in effect a registration of its corporate name as provided in the Alabama Business Corporation Act.

4. Must conform to any rule promulgated by a licensing authority having jurisdiction of a professional service described in the articles of incorporation of such corporation.

A professional corporation may issue shares, fractional shares, and rights or options to purchase shares only to qualified persons.

Where deemed necessary by the licensing authority for any profession in order to prevent violations of the ethical standards of the profession, the licensing authority may, within its rule-making power, by rule further restrict, condition, or abridge the authority of professional corporations to issue shares but no such rule shall, of itself, have the effect of causing a shareholder of a professional corporation at the time the rule becomes effective to become a disqualified person unless and to the extent specified by the licensing authority.

A shareholder of a professional corporation may transfer or pledge shares, fractional shares, and rights or options to purchase shares of the professional corporation only to qualified persons.

Any issuance or transfer of shares in violation of the statutory restrictions is void.

If a shareholder of a professional corporation dies or becomes disqualified, the shares of the deceased or disqualified person may be transferred to a qualified person and, if not so transferred, must be purchased or redeemed by the professional corporation to the extent of funds which may be legally made available for such purchase.

If the price for such shares is not fixed by the articles of incorporation or bylaws of the professional corporation or by private agreement, the professional corporation, within six months after such death or 30 days after such disqualification or transfer, as the case may be, shall make a written offer to pay for such shares at a specified price deemed by such professional corporation to be the fair value thereof as of the date of such death, disqualification or transfer. Such offer shall be given to the executor or administrator of the estate of a deceased shareholder or to the disqualified shareholder or transferee and shall be accompanied by a balance sheet of the professional corporation, as of the latest available date and not more than 12 months prior to the making of such v offer, and a profit and loss statement of such professional corporation for the 12 months’ period ended on the date of such balance sheet.

If within 30 days after the date of such written offer from the professional corporation the fair value of such shares is agreed upon between such disqualified person and the professional corporation, payment therefor shall be made within 90 days, or such other period as the parties may fix by agreement, after the date of such offer, upon surrender of the certificate or certificates representing such shares.

Upon payment of the agreed value the disqualified person ceases to have any interest in the shares.

If within 30 days from the date of such written offer from the professional corporation, the disqualified person and the professional corporation do not so agree, then either party may commence a civil action in the circuit court in the county in Alabama where the registered office of the professional corporation is located.

A professional corporation is not required to purchase the shares of a disqualified person where the period of such disqualification is for less than 12 months from the date of disqualification or transfer.

Any provision regarding purchase, redemption or transfer of shares of a professional corporation contained in the articles of incorporation, bylaws or any private agreement shall be specifically enforceable in the courts of Alabama.

Every individual who renders professional services as an employee of a or professional corporation is liable for any negligent or wrongful act or omission in which he personally participates to the same extent as if he rendered such services as a sole practitioner.

The personal liability of a shareholder, employee, director or officer of a professional corporation is no greater in any respect than that of a shareholder, employee, director or officer of a corporation organized under the Alabama Business Corporation Act.

The relationship between an individual performing professional services as an employee of a professional corporation and a client or patient shall be the same as if the individual performed such services as a sole practitioner.

The relationship between a professional corporation performing professional services and the client or patient is the same as between the client or patient and the individual performing the services.

Any privilege applicable to communications between a person rendering professional services and the person receiving such services recognized under the laws of Alabama, whether statutory or deriving from common law, remains inviolate and extends to a professional corporation and its employees in all cases in which it would be applicable to communications between an individual rendering such professional services and a person receiving such services.

A voting trust with respect to shares of a professional corporation is not valid unless all the trustees and beneficiaries thereof are qualified persons, except that a voting trust may be validly continued for a period of 12 months after the death of a deceased beneficiary or after a beneficiary has become a disqualified person.

At least one director of a professional corporation and the president of a professional corporation shall be qualified persons with respect to the corporation; provided, however, that the foregoing restriction shall not apply for a period of 12 months after the death of the sole shareholder of a professional corporation.

Nothing in the Act restricts or limits in any manner the authority or duty of a licensing authority with respect to individuals rendering a professional service within the jurisdiction of the licensing authority. Nothing in the Act restricts or limits any law, rule or regulation pertaining to standards of professional conduct.

Nothing in the Act limits the authority of a licensing authority to impose requirements in addition to those stated in the Act on any professional corporation within the jurisdiction of the licensing authority.

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Inside Alabama Professional Corporation for Medical Doctors Law