On June 14, 2013, Governor Rick Scott signed the Florida Revised Limited Liability Company Act (the “New Act”) into law. The New Act is a complete rewrite of the existing LLC Act in Chapter 608 of the Florida Statutes. The New Act went into effect on January 1, 2014 for all LLCs formed on or after that date.
LLCs formed prior to January 1, 2014, may continue to operate under the existing LLC Act until January 1, 2015. On that date, the current LLC Act is repealed and the New Act will apply to all Florida LLCs. Members and managers of existing LLCs should use this transition period to review their existing LLC Operating Agreements and determine whether the changes made by the New Act require any amendments.
Key provisions of the New Act include the following:
Electronic Signatures. Electronic signatures are now expressly permitted. Section 605.0102(62)(b).
Non-Waivable Provisions. Like the existing LLC act, the New Act is a “default” statute, meaning that in most cases, the members of an LLC can agree in their operating agreement to an alternative framework which supersedes specific statutory provisions. The New Act expands the list of non-waivable provisions that may not be altered or overridden by the operating agreement. These new non-waivable provisions include, but are not limited to (a) the power of a member to dissociate; (b) the right of a member to approve a merger, interest exchange or conversion; and (c) any restrictions on the rights of any person other than a manager or a member. Accordingly, it will be important to update existing operating agreements to address these non-waivable provisions. Section 605.0105(3).
Binding Effect on Non-Signatories. All LLC members are bound by the Operating Agreement whether or not it is signed by them. Section 605.0106(2).
Need a Member. An LLC must have at least one (1) member upon formation. Section 605.0201(4).
Dissociation. A member will now have the non-waivable right to dissociate from an LLC, but the dissociation does not trigger a buy-out right. Instead, the dissociated member only will have the rights of an unadmitted transferee (with certain exceptions). Section 605.0216.
Statements of Authority. LLCs can now file “Statements of Authority” which are public records that can identify or limit the people having the power to act for or bind an LLC. The filing is valid for five (5) years and will (a) provide protection for an LLC against unauthorized acts and (b) provide certainty for those doing business with an LLC. Section 605.0302.
Creditor-Enforced Capital Contributions. Creditors will now have the right to enforce judgments against capital contributions by members. Section 605.0403(4).
Elimination of Manager-Members. The existing act allowed for the confusing term of “manager-members”. This term has now been eliminated in the New Act, such that an LLC must now be either managed by its members or managers. If neither management structure is stated in the articles of organization or the operating agreement then the default shall be a member-managed LLC. Section 605.0407.
Non-Competition. Under the New Act, managers of manager-managed LLCs, and all members of member-managed LLCs, will be subject to a non-competition covenant. This is a waivable provision, and LLC managers and members will need to take due care to ensure it is properly addressed or waived in operating agreements. Section 605.04091(2)(c).
Appraisal Rights. In certain circumstances, members can require an LLC to pay them a “fair price” for their LLC interests. Under the New Act, appraisal rights have been expanded by providing additional events which would trigger an appraisal, but such rights may be waived or eliminated in an operating agreement so long as such waiver or elimination is approved by the affected member or group of members. Section 605.1006.
All new LLCs should be formed in compliance with the New Act. In addition, members of existing LLCs should consult with counsel in order to evaluate whether existing operating agreements should be revised in order to address the changes in the New Act.