Florida Enacts a New Revised Limited Liability Company (LLC) Act on January 1, 2014July 12, 2013
On June 14, 2013, Governor Rick Scott signed the Florida Revised Limited Liability Company Act into law (the “New LLC Act”), which should attract more businesses to our state. Effective January 1, 2014, this new law replaces most provisions of the existing Act (Chapter 608) with an entirely new chapter. The New LLC Act, to be located in Chapter 605, Florida Statutes, makes substantive changes to the rules governing all limited liability companies (“LLC”) in Florida, and will impact many businesses statewide.
While the New LLC Act will apply to newly formed LLCs in 2014, it will apply to all existing LLCs starting January 1, 2015. Therefore, if you are an LLC member or manager it is important that you know how the new law will affect you and your company. Fortunately, 2014 will be a “transition year” where existing LLCs may elect (but are not required) to have the new rules apply to them, which will allow some flexibility and time for LLCs in Florida to grasp all of the new changes. Some of the changes that could affect your LLC are as follows:
1. New Restrictions on Operating Agreements.
The statutory provisions governing operating agreements have expanded, and there are many new restrictions regarding what an operating agreement can and cannot contain. For example, an operating agreement may not vary several of the New LLC Act’s default provisions, including those pertaining to registered agents, dissolutions, mergers, indemnities, and the rights and obligations of members and managers. Therefore, it is important for all LLCs to review their operating agreements and other governing documents in order to ensure they do not conflict with the new requirements. Even if you don’t currently have an operating agreement, it is important that you review the new law’s changes, because many more default rules will apply in the absence of an operating agreement. A consult with counsel can assist you in making sure your company’s governing documents adequately protect your business interests.
2. No More “Managing Member” Designation
Under the new law, an LLC can no longer designate specific “managing members” to manage the company. Instead, an LLC may be managed by its members, or by designated managers. All LLCs previously managed by “managing members” will be considered member-managed, unless the operating agreement or articles of organization provide otherwise.
To help eliminate confusion as to who may manage, act for, or bind an LLC, the New LLC Act allows a limited liability company to file a Statement of Authority with the Florida Secretary of State. The Statement of Authority can specify precisely which actions particular members or managers may take on behalf of the company. This will allow a company to a create a clear, official record that defines which individuals have authority to act for the company, and what specifically those individuals are authorized to do. A proper Statement of Authority can thus provide legal protection to an LLC; both as a notice to others and as an official record in case issues arise. Again, a consult with counsel can ensure your company is both compliant under the new law and properly protected.
3. Member Dissociation
Additionally, the New LLC Act expands the provisions regarding dissociation of a member. A member may now dissociate from an LLC at any time. More importantly, the new law provides limited liability companies with a cause of action for “wrongful dissociation.” This means than an LLC may now be entitled to damages if a member dissociates in any manner the new statute defines as wrongful, including contrary to an express provision of the operating agreement. The changes now provide Florida LLCs an opportunity to recover costs stemming from a member’s wrongful dissociation. However, a limited liability company must enforce this right themselves in order to recover, and should consult the New LLC Act and counsel to determine when this additional remedy may be available.
4. Appraisal Rights
The New LLC Act also expands an LLC member’s appraisal rights. Appraisal rights are the statutory right of an LLC’s minority shareholders to have a fair LLC interest price be determined by a judicial proceeding or independent valuator, and the obligation for the acquiring corporation to repurchase the LLC interest at that price. The old law only gave members a right to an appraisal upon the merger or conversion of an LLC, whereas the New LLC Act expands the circumstances whereby a Member may exercise their appraisal rights. Under the New Law, appraisal rights are triggered in the following instances (i) upon an interest exchange or an asset sale ; (ii) when an LLC’s regulations are amended in a manner that reduces a member’s interest when the LLC has an obligation to repurchase that interest; (iii) when a member’s voting or other rights are changed in a manner adverse to a member’s interests; (iv) when an LLC attempts to change or abolish a member’s appraisal rights themselves. Like the expanded rules for member dissociation, the additional provisions regarding appraisal rights will create new causes of action that all LLCs will need to be prepared to deal with.
Of course, these are just a sampling of the new LLC Act’s changes and there are many more included in the New LLC Act. For more information, you can view the New LLC Act in its entirety here, or call Marshall Socarras Grant, P.L. at 561.361.1000 or by email at firstname.lastname@example.org directly for a more information. Before the New LLC Act goes into effect, it is important you consult an experienced firm like Marshall Socarras Grant, P.L. that is intimately familiar with these changes and how it may impact your business.
Marshall Socarras Grant, P.L. is a leading boutique law firm based out of Boca Raton, Florida that is focused on providing sophisticated corporate and transactional services and business law advice to individuals and small and large companies in a variety of industries. The firm also handles bankruptcy and litigation services in all Florida state and federal courts.