FLORIDA LLC ACT REVISION [FLORIDA]
My partner, Rick Josepher, was involved through the Florida Bar in a major update to Florida’s limited liability company provisions which were recently enacted into law. The following is a summary regarding the new provisions that he prepared.
In its session which ended May 3rd, the Florida legislature enacted legislation (herein, the “New Act”) which substantially amends the Florida’s existing Limited Liability Company Act.
The New Act creates a new portion of ch. 608, F.S., which it delineates as part II of the LLC act. The existing LLC statutes are designated as part I of the chapter. Until January 1, 2015, part I remains in effect as to LLCs in existence before January 1, 2014. As of January 1, 2015, all LLCs are subject to part II, and part I is repealed.
A summary of the provisions of the New Act is contained in the Florida Senate’s Bill Analysis and Fiscal Impact Statement (the “Senate Statement”). Below are portions of the Senate Statement, modified in part.
The New Act is the result of efforts by representatives of the Business Law Section, the Tax Section, and the Real Property, Probate, and Trust Law Section of The Florida Bar, which included members of our firm. The New Act is substantially based on the Revised Uniform Limited Liability Company Act of 2006 as amended in 2011 (RULLCA) with deviations to reflect unique situations present in Florida.
The New Act:
- Expands the list of nonwaivable default rules in s.608.105, F.S., which cannot be “trumped” by the operating agreement;
- Modifies rules for the power of members and managers to bind the company;
- Modifies provisions addressing the LLC’s management structure (including the elimination of the term “managing member”);
- Modifies default management and voting rules;
- Modifies provisions relating to member dissociation and company dissolution;
- Modifies provisions for service of process on LLCs;
- Modifies provisions for derivative actions;
- Modifies appraisal rights provisions, including adding events that trigger appraisal rights, and provides clarifications to the procedural aspects of the appraisal rights provisions, particularly in dealing with organic transactions approved by way of written consent.
- The New Act does not change the rules regarding charging orders, and therefore the 2011 amendments to s. 608.433, F.S., made as a result of the Olmstead Patch continue unchanged; and
- Adds provisions to permit interest exchanges and in-bound domestications by non-U.S. entities.
Below is a description of some of the changes in the New Act:
The New Act retains many similarities to current law. Like current law, the New Act provides a gap-filler provision for when the operating agreement does not provide a specific rule. Additionally, the New Act delineates matters that the operating agreement may not alter. This is a far more extensive list than exist under current law.
Currently Florida law contains the concept of a “managing member,” who is elected from among the existing members. The term “managing member” is fairly unique to Florida and is not used in the statutes in any of the more prominent states. The New Act changes existing law by eliminating the concept of a “managing member.” This change was made to eliminate the confusion and disparate interpretations under existing law as to the ramifications that having a managing member has on the nature of the management structure of the LLC.
Current law does not apply the concept of interest exchange to LLC’s. The New Act applies this concept from corporate law to LLCs. In an interest exchange, the separate existence of the acquired entity is not affected and the acquiring entity acquires all of the interest of one or more classes of the interests in the acquired entity. An interest exchange also allows for an indirect acquisition through the use of consideration in an exchange that is not provided by the acquiring entity, such as consideration from another or related entity.
The new act, for the first time, allows domestications of non-U.S. entities who wish to become domestic LLCs in Florida. A domestication allows the domesticating entity to retain its status and existence in the non-U.S. jurisdiction in which it currently exists. The New Act allows domestication of all non-U.S. entities. Much like a merger, the New Act requires a plan of domestication and approval of domestication and allows amendment or abandonment of the plan. The plan becomes effective upon the passage and filing of the articles of domestication.