July 31, 2013
Best Practices: “Florida Revised Limited Liability Company Act.”
by Victor A. Diaz
“For the times they, they are a-changin’” – Bob Dylan
On June 13, 2013, Florida’s governor signed into law Chapter 2013-180 an act creating Chapter 605 of the Florida Statutes to be known as the “Florida Revised Limited Liability Company Act.” The new statute constitutes a complete re-write of Florida’s organic law governing limited liability companies. Largely based on the Revised Uniform Limited Liability Company Act of 2006, as amended in 2011 (RULLCA), ABA Revised Prototype LLC Act, and others, the statute retains few provisions of existing Florida law.
The new statute addresses virtually all aspects of limited liability companies including, but not limited to, general provisions relating to operating agreements, powers, property, rules of construction, names, and registered agents of limited liability companies. It becomes effective on January 1, 2014 for all limited liability companies formed after that date and on January 1, 2015 for all other limited liability companies regardless of their formation date. In light of the scope and breath of statutory changes, consisting of approximately 150 pages, all entities doing business with limited liability companies, including Lenders, should become familiar with the new statute.
This article highlights a few sections of particular importance to Lenders. It is by no means a comprehensive treatment of the entire chapter. It looks only at agency principles of implied or apparent authority applicable to members and managers and their ability to enter into transactions, or otherwise act for or bind limited liability companies.
New Section 605.0407 eliminates the use of the concept of “managing member” and “managing members.” Going forward, all limited liability companies will be deemed member-managed limited liability companies, unless the operating agreement or articles of organization provide that the company is manager-managed. Consequently, after implementation of the statute, existing companies which had been managed by a managing member will be deemed to be member-managed. Because information regarding the management structure of the company is not required to be published, Lenders will need to review the company’s operating agreement to determine if the company has elected to be manager-managed.
In a member-managed limited liability company, the management and conduct of the company will be vested in the members. An act of a member will bind the company in the ordinary course of business or activities of the company. §605.04074, Fla. Stat. If the act of the member is not within the ordinary course of the company’s activity, the act of the member binds the company only if the act was authorized by appropriate vote of the members. Id. For instance, the sale of substantially all the assets of a company may not be within the ordinary course of business for the company. Again, a review of the operating agreement will be critical in determining if the member is acting within the ordinary course of the company’s business or whether a resolution adopted by a vote of the members will be required. The same will be true of manager-managed companies whose actions outside the ordinary course of business will require a vote of the members.
Additionally, the new act will allow for the filing of a statement of authority identifying the person, or persons, who may execute instruments transferring real property, enter into transactions, or otherwise act for or bind the company. §605.0302, Fla. Stat. In connection with real estate transactions, “[u]nless a certified statement of authority recorded in the applicable real estate records limits the authority of a member or a manager, a member of a member-managed company or a manager of a manager-managed company may sign and deliver an instrument transferring or affecting the limited liability company’s interest in real property. The [certified statement of authority] is conclusive in favor of a person who gives value without knowledge of the lack of the authority of the person signing and delivering the instrument.” §605.04074(3), Fla. Stat.
Undoubtedly, the new act will be subject to scrutiny in the coming months and years as courts interpret its new provisions. In the meantime, it is imperative for parties dealing with Florida limited liability companies to understand the implications of the new statute, particularly as to its impact on agency principles affecting the ability of members or managers to bind and obligate companies.
For more information, contact Victor at 407.667.8811 or at firstname.lastname@example.org.