United States:
Legislature Rewrites Florida LLC Law
15 May 2013
Foley & Lardner
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The 2013 Florida Legislature made several important changes to
the law governing Florida limited liability companies (LLCs). The
new law was based primarily on the Revised Uniform Limited
Liability Company Act as amended in 2011.
Important changes from the current LLC law include:
- Expanded list of fiduciary duties and management rules that
cannot be "overridden" by the operating agreement
- Changes to LLC governance, including new member voting
rules
- Elimination of the concept of "managing member"
- Expanded categories for which indemnification of members and
managers is prohibited
- Expanded "safe harbor" for approving
conflict-of-interest transactions
- Modified rules for "derivative actions," where a
member may bring an action on behalf of the company
- New provisions relating to equity exchanges and inbound
domestications by non-U.S. entities
- Expanded list of events giving rise to appraisal rates
Florida's Revised LLC Act, consistent with the prior law,
generally adopts a "default provision" approach, which
permits the members of the LLC to enter into an operating agreement
to regulate the affairs of the LLC and govern the relationship
among the members, management, and the company. Most of the
provisions of the Florida LLC statute are default provisions that
only apply if the members fail to agree upon other specific rules.
The current law imposed seven non-waiveable requirements that must
apply to all Florida LLC agreements. These non-waiveable rules
include prohibitions against elimination of the duty of loyalty,
unreasonably reducing the duty of care, eliminating the obligations
of good faith and fair dealing, and unreasonably restricting a
member's right to information and records.
The new law expands the list of non-waivable provisions. Under
the Florida Revised LLC Act, operating agreements also may not
relieve a person from the liability for bad faith or willful
misconduct, restrict the power of a member to disassociate,
unreasonably restrict the right of a member to maintain an action
against another member, or provide indemnification for acts taken
in bad faith.
The current Florida LLC law contains the concept of a managing
member, who is elected from among the existing members. The new
legislation eliminates the concept of a managing member and
provides that existing LLCs that are managed by a managing member
are deemed to be member-managed.
The Revised LLC Act authorizes an operating agreement or the
articles of organization to establish an LLC's status as
manager-managed. As in current law, an LLC that does not
effectively designate itself as manager-managed will operate under
the statutory rules governing a member-managed LLC.
The Revised LLC Act continues the so-called "Olmstead
Patch," adopted in 2011 by the Legislature in response to the
Florida Supreme Court decision Olmstead v. Federal Trade
Commission, 44 So3d 76 (Fla 2010), which clarified that a
charging order is the sole and exclusive remedy of a judgment
creditor of a member of a multi-member LLC seeking to levy against
the member's LLC interest.
The new legislation represents an important step forward for
Florida LLCs and their investors and managers. The new law assures
that Florida LLCs will continue to be good choice of entity for
organizing business ventures.
The governor is expected to sign the Revised LLC Act. The new
law creates Chapter 605 of the Florida Statutes. Until January 1,
2015, LLCs in existence before January 1, 2014 may continue to
operate under the provisions of current law, which are contained in
Chapter 608. On January 1, 2015, all Florida LLCs are subject to
the provisions under Chapter 605, and the old law, Chapter 608, is
repealed.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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