Florida’s Revised Limited Liability Company Act Seeks to Modernize and Improve Current Law
By Kluger Kaplan July 8, 2013
By Josh Rubens
On May 3, 2013, the Florida legislature enacted the Florida Revised Limited Liability Company Act, which will govern all LLCs formed or registered in Florida on or after January 1, 2014. By January 1, 2015, the current law will be repealed and the Revised Act will govern all Florida LLCs regardless of the date of formation or registration. LLCs formed or registered in Florida before January 1, 2014 that desire to be governed by the Revised Act prior to January 1, 2015 must elect to do so through their operating agreement.
The Revised Act is based on the Uniform Law Commission’s Limited Liability Company (Revised) Act. The Uniform LLC Act has been adopted by eight (8) other states, including California, New Jersey, and Utah. The Revised Act seeks to improve Florida LLC law by adopting filling gaps not covered by existing law, and clarifying and simplifying certain other provisions. As with the existing LLC Act, the Revised Act is a default statute which may be modified by operating agreement except with respect to certain non-waivable provisions.
Certain of the new provisions of the Revised Act are as follows:
- Expanded events that trigger appraisal rights, including in certain circumstances relating to the sale of substantially all of the assets of the LLC, or if an amendment to the operating agreement alters or abolishes a member’s right to vote.
- Non-U.S. entities may “domesticate” themselves as Florida LLCs. These non-U.S. entities remain foreign entities in their country of formation but also exist as Florida LLCs.
- LLC’s may file a statement of authority with the Florida Department of State setting forth the power of the members, managers, or others to bind the company.
- Members are not necessarily entitled to be compensated for services provided to the LLC, except for those related to the winding down of the LLC. This issue was previously not addressed and was often the subject of litigation.
- Service of process on LLCs must be effectuated through service on the LLC’s registered agent, and if not possible, then on members, managers, and employees, in descending order. If those methods are unsuccessful through reasonable diligence, the LLC may then be served through service on the Florida Secretary of State.
The Revised Act also expands the number of non-waivable provisions that may not be modified by operating agreement. For example, the Revised Act provides that LLCs cannot indemnify members or managers for intentional misconduct, bad faith actions, or for any actions taken in knowing violation of the law. The Revised Act also expands the default provisions regarding dissolution, rights of members to file derivative actions and actions against other members, rights of a court to appoint a special litigation committee, among other areas.
It is very important that all stakeholders of Florida LLCs become familiar with the Revised Act. The Revised Act improves existing law in many ways. Existing Florida LLCs may even desire to elect to have the Revised Act govern their LLC prior to January 1, 2015.