On June 14, 2013, Governor Rick Scott signed into law the new Florida Revised Limited Liability Company Act (the “New Act”). The New Act is codified in new Chapter 605 of the Florida Statutes and, as of January 1, 2015, will repeal the existing LLC Act (currently found in Chapter 608). The New Act carries over many of the provisions of the existing LLC Act but makes substantial changes in several respects to reflect unique circumstances affecting Florida limited liability companies (“LLCs”). The New Act is based substantially on the Revised Uniform Limited Liability Company Act of 2006 (as amended in 2011).
The New Act will become effective for all new LLCs formed or registered to do business in Florida on or after January 1, 2014. As of January 1, 2015, all LLCs formed or registered to do business in Florida will be subject to the New Act. LLCs in existence prior to January 1, 2014 may continue to operate under the provisions of the existing LLC Act, unless the LLC elects to be governed by the New Act before January 1, 2015.
The New Act, like the existing LLC Act, is a default statute which means that members of an LLC may override any non-waivable statutory provisions in their operating agreement. The non-waivable provisions of the New Act, however, are more extensive than those provisions in the existing LLC Act. The New Act generally provides that the operating agreement may not vary: (1) the LLC’s capacity to sue and be sued in its own name; (2) the applicable law governing LLCs; (3) the power of a person to dissociate; (4) the grounds for dissolution; and (5) the required content of a plan of merger, a plan of interest exchange, a plan of conversion, or a plan of domestication. The operating agreement also may not eliminate the duties of loyalty and care, or the obligation of good faith and fair dealing. Further, the operating agreement may not relieve or exonerate a person from liability for certain conduct involving bad faith, and similarly may not provide for indemnification for a member or manager when he or she commits certain acts involving bad faith.
The New Act changes many aspects of the existing LLC Act including modifying provisions relating to (1) the rules for the power of members and managers to bind the LLC; (2) the LLC’s management structure (eliminating the term “managing member”); (3) agency and voting rules for members and managers; (4) member dissociation and LLC dissolution; (5) judicial dissolution and appointment of receivers and custodians; (6) service of process on LLCs; (7) derivative actions by members (adding provisions regarding special litigation committees); (8) organic transactions such as mergers and conversions (adding provisions allowing interest exchanges and in-bound domestications by non-U.S. entities); and (9) appraisal rights (adding events that trigger appraisal rights).
The New Act does not change the rules relating to charging orders. The 2011 amendments made as a result of the “Olmstead Patch” continue unchanged in the New Act. Thus, under the New Act, a charging order is still the sole and exclusive remedy afforded a judgment creditor of a member in a multi-member LLC. The New Act continues to include the provisions relating to a judgment creditor of a member in a single member LLC; a creditor of a single member may seek a court supervised foreclosure against the single member’s membership interest, but only upon a showing to the court issuing the charging order that the judgment will not be satisfied out of LLC distributions within a “reasonable time.”
On the whole, the New Act should make the use of Florida LLCs more attractive for business owners.