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April 1, 2015

Best Practices: Obtaining Valid and Enforceable Loan Documents Under Florida’s Revised Limited Liability Company Act

by Victor A. Diaz

Effective January 1, 2015, all limited liability companies organized under Florida law, regardless of their date of formation, are governed by the new Florida Revised Limited Liability Company Act. Chapter 605, et. seq., Fla. Stat. Under the new statute, a limited liability company will be deemed to be a member-managed limited liability company unless the Articles of Organization or Operating Agreement expressly provide otherwise. Notably, the terms “managing member” and “managing members,” in and of themselves, are insufficient to overcome the presumption that the limited liability company is member-managed. For all intents and purposes, the terms “managing member” and “managing members” are no longer recognized forms of management. This is a departure from established law and has implications on who can bind the limited liability company.

In order to overcome the presumption that the company is member-managed, the Articles of Organization or Operating Agreement must provide that: (i) the company is or will be manager-managed; (ii) the company is or will be managed by managers; or (iii) management of the company is or will be vested in managers. In the absence of one these provisions, the company will be deemed member-managed. The new act also allows companies to grant, or limit, the authority of an individual to enter into transactions on behalf of, or otherwise act for or bind, the company by means of a Statement of Authority. Statements of Authority must be filed with the Florida Department of State, and in situations involving interest in real property, a certified copy must be recorded in the official records of the county where the real property is located.

In the absence of a Statement of Authority, each member or manager of a member-managed or manager-managed company, respectively, is an agent for the company and has conclusive authority to sign and deliver documents binding the company. Thus, if there is no Statement of Authority, it is not necessary to review the company’s Operating Agreement to determine signing authority, provided the Articles of Organization and the Annual Report both evidence the authority of the person who is signing on behalf of the company. Evidence of authority may be determined by examining the Florida Secretary of State’s website to confirm the company is either member-managed or manager-managed, and to establish the identity of the members or managers.

In the event the Articles of Organization and the Annual Report do not identify the members or managers of the company, or the Articles of Organization and the Annual Report do not name the specific person who proposes to execute documents on behalf of the company, a review of the Operating Agreement becomes necessary. If the Operating Agreement is not produced for examination, or it is inconclusive, the best practice is to have all of the members of the company execute an affidavit establishing that they are all of the members of the company and that they consent to bind the company. This affidavit shall establish the names of all of the current members of the limited liability company and their respective interests. For more information on how lenders can obtain valid, enforceable loan documents executed by limited liability companies in Florida, please contact Victor at 407-618-0694 or at vdiaz@starfieldsmith.com.