In General. On June 11, 2015, Governor Rick Scott signed into law various amendments to the Florida Revised Limited Liability Company Act (the “Act”) which address several issues or “glitches” contained in the Act. The amendments generally go into effect July 1, 2015, except for those certain amendments that are effective retroactive to January 1, 2015 (primarily dealing with certain minor amendments concerning deletion of references to the prior LLC act, revising cross references among different Florida statutes, and fixing grammatical and punctuation errors). Of significant import are the amendments made to the fiduciary duties imposed under the Act and a member’s power to dissociate from a LLC.
Fiduciary Duties Expanded Under New Default Rules. Prior to the amendments, fiduciary duties (i.e. duty of loyalty and duty of care) applicable under the Act to LLC members, managers, and other persons, were, by default, limited in scope. The amendments switch this default rule from one of limited scope to one of potentially unlimited scope (subject to modification, as further discussed herein). Additionally, common law principles relating to the fiduciary duties of loyalty and care now apply to supplement the Act, thereby further expanding the default scope of fiduciary duties. However, the Act now allows an operating agreement to restrict, expand, or eliminate any fiduciary duty to the extent allowed under the Act (i.e. not “manifestly unreasonable”). In drafting new operating agreements, parties may consider including a broad waiver of fiduciary duties to the extent permitted under the Act, including an agreement by the parties that such waiver is not manifestly unreasonable. In reviewing existing operating agreements, consider the extent to which there is a waiver of fiduciary duties and, where the waiver is limited or there is none at all, determine to what extent the parties desire to amend the operating agreement to restrict, expand, or eliminate fiduciary duties to the extent allowed under the Act.
Power to Dissociate May be Altered by Agreement. The Act was amended to allow an operating agreement to vary the power of a member to dissociate from a LLC. Prior to such amendment, an operating agreement could not, by its terms, limit a person’s ability to dissociate. Absent any specific language in an operating agreement to the contrary, a person has the power to dissociate. In drafting new operating agreements, consideration should be given as to whether the parties desire to include a power to dissociate, and, in existing operating agreements, whether it should be amended to prohibit its members from withdrawing.
Other Amendments.Other amendments to the Act that are of note are as follows:
- Third parties are not deemed to have knowledge of any limitation on a person’s authority to transfer LLC real estate unless such limitation is in an affidavit, certificate, or other instrument recorded in the clerk’s office of the county in which the real estate is located.
- Where an action is taken by members of an LLC without a meeting, such action must be approved by the minimum number of votes necessary to take the action had the members voted on such matter at a meeting.
- In a member-managed LLC, where a member requests other information concerning the LLC’s activities, affairs, financial condition, and other circumstances, the LLC shall provide within ten days of receiving such demand, a record of either: (1) the information that the LLC will provide and when and where the LLC will provide such information; or (2) if any requested information not provided, the reasons it is not being provided. This provision was added to parallel where a member requests such info in a manager-managed LLC.
- Where a Florida LLC is administratively dissolved or a foreign LLC’s certificate to do business in Florida has been revoked, the Act specifically enumerates those items required to be included in an application for reinstatement and, in addition, provides an alternative method of reinstatement whereby the LLC pays all delinquent fees and penalties together with a current annual report. This alternative method, in practice, had been allowed by the Florida Department of State (the “Department”) but is now expressly provided for by statute.
- A member’s ability to contest the legality of a proposed or completed appraisal of an interested transaction after such member has approved the appraisal event has been repealed.
- Generally, the management structure of a LLC may be set forth in either the articles of organization or the operating agreement. Portions of the Act that were redundant and created confusion were repealed. Please note, that, where the provisions in the articles of organization filed with the Department and the operating agreement of a LLC conflict, including but not limited to the management structure, the Act provides that, as it relates to members, dissociated members, transferees, and managers, the operating agreement controls; as to other persons to the extent they reasonably rely on the articles of organization, the articles control.
- The definition of “majority-in-interest”, has been amended to clarify that, in determining who holds more than 50% of the then-current percentage or other interest in the profits of the LLC, generally, the interests owned by all members of the LLC, including non-voting interests, are taken into account.
- The prior act, the Florida Limited Liability Company Act, was officially repealed. All LLCs are now subject to the Act, as amended.