Florida Revised Limited Liability Company Act: Management

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As described generally in our recent article “Florida’s New Revised Limited Liability Company Act”, the Florida legislature passed the new Florida Revised Limited Liability Company Act (the “New Act”) which becomes effective on January 1, 2014 for all limited liability companies (“LLCs”) formed in the State of Florida on or after January 1, 2014. The New Act applies to all LLCs, regardless of when formed, beginning January 1, 2015 and the existing Florida Limited Liability Company Act (the “Existing Act”) will be repealed on that date. The New Act modifies certain provisions relating to management of LLCs.

The Existing Act includes the concept of a “managing member” that is elected by the members to manage the LLC. The New Act eliminates the concept of a “managing member”. The New Act provides that existing LLCs that are managed by a managing member are deemed to be member-managed (as opposed to manager-managed). The New Act provides that, absent an agreement, a member in a member-managed LLC is not entitled to compensation for its services, except for reasonable compensation for serviced rendered to wind up the LLC. The New Act further provides that a member who advances funds to an LLC is entitled to reimbursement.

The New Act provides that the operating agreement can establish a manager-managed LLC, in addition to providing such a designation in the LLC’s articles of organization. This concept is carried over from the Existing Act which provides that an LLC may, but is not required to, identify whether it is “manager-managed” in its articles of organization. As in the Existing Act, an LLC that does not effectively designate itself as “manager-managed” will be subject to the statutory rules governing a “member-managed” LLC.

The voting provisions of the New Act are derived in part from the Existing Act and in part from the Revised Uniform Limited Liability Company Act of 2006, as amended in 2011. The New Act carries on several concepts from the Existing Act such as: (1) in a member-managed LLC, each member votes in accordance with its percentage of profits interest in the LLC; (2) in a member-managed LLC, all decisions, whether in the ordinary course of business or not, require the consent of members holding a majority of the profits interest in the LLC; (3) a transferring member that transfers all of its transferable interest continues to vote as a member based on percentage of profits interest that the transferring member would have had but for the transfer; (4) a requirement that notice of action by written consent of members be sent within 10 days to all members who did not consent; and (5) managers may act by unanimous written consent or by proxy vote. The New Act eliminates, however, the requirement under the Existing Act to provide notice of any non-unanimous manager written consent actions within 10 days to all managers that did not consent to the action because, under the default rule, managers only can act by unanimous written consent.

The New Act eliminates the following provisions of the Existing Act: (1) §608.4231(4), which prohibits amending the articles of organization or the operating agreement to provide for a vote of less than a majority in interest; (2) §608.4231(5), which provides that notwithstanding anything to the contrary in the articles of organization or the operating agreement, members have the right to vote on dissolutions and mergers. (This change eliminates an ambiguity under the Existing Act as to whether non-voting member may vote on a dissolution or merger); and (3) §608.4231(7), which expressly permits the articles of organization or the operating agreement to provide for the mechanics of voting. (This section is superfluous, because, under the New Act, the operating agreement and the articles of organization, respectively, can include any provision that is not expressly prohibited by the New Act).

 

Topics:  Limited Liability Act, LLC, New Legislation

Published In: Business Organization Updates, General Business Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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