In 2013, the Florida Revised Limited Liability Company Act (the “Act”) was signed into law. The Act was codified in an entirely new chapter in the Florida Statutes, Chapter 605. However, the then-current Limited Liability Company Act, found in Chapter 608, did not immediately vanish with the introduction of Chapter 605. Instead, to provide for time for businesses and the legal community to adjust to the new Act, special transition rules were implemented. All LLCs formed in or registered to do business in the state prior to January 1, 2014 were still subject to the provisions of Chapter 608 unless they elected otherwise; those formed after that date were subject to Chapter 605. This transition period, where both Chapters were operative, was short-lived. As of January 1, 2015 all LLCs organized under Florida law or registered to do business in the state are governed by the rules found in Chapter 605.
What Changed Besides Chapter Numbers?
The short answer is: too many things to put in a short answer. It is important, however, to remember that, for the most part, the provisions of the Act (as was the case under the former law) are default provisions for governing the relationships, rights and duties of the company, its members, its managers and third parties. As such, these default rules are only applicable in the absence of an overriding provision in your company’s operating agreement. However, many of the substantive changes made by the Act could negate certain provisions in your operating agreement, even though those very same provisions were valid and enforceable just a few months ago. The Act did not “grandfather” older operating agreements; it governs them as if they were drafted today.
While it would be impossible to present a comprehensive overview of the changes made by the Act, some key items include:
- The elimination of the term “managing member”;
- The addition of 11 new “nonwaiveable” provisions, i.e. rules you cannot override in your operating agreement;
- The imposition of direct personal liability on a member and/or a manager for an improper distribution; and
- The expansion of the methods by which a member can disassociate, i.e. withdraw, and the consequences that result.
These few items represent only a fraction of the revisions the Act made to the prior law. Meanwhile, a bill is currently working its way through the Florida Legislature (H.B. 531) which, in addition to making technical “glitch” fixes, would make some substantive changes to the Act if passed. For example, one of the Act’s current “nonwaiveable” rules prevents an operating agreement from varying a member’s right to disassociate. H.B. 531, in its current form, would remove that provision. Whether this change occurs remains to be seen, but the example illustrates a larger point – the law is constantly changing and those changes may have very real impacts on your company, its members and its managers. This would naturally lead prudent LLC members and managers to ask…
Do We Need A New Operating Agreement?
The most accurate answer to that question is the first answer all lawyers learn – it depends. Chances are much of your operating agreement is unaffected by the Act. However, while relying on chance may occasionally work on the roulette table, doing so in the conduct of your business is ill advised.
One thing is certain. If the new Act has altered the meaning or terms of your company’s operating agreement it will be much worse to make that discovery only after some problem or conflict has arisen. If your operating agreement was drafted prior to 2014, have it reviewed by a competent attorney familiar with the Act to ensure that its provisions have not been changed by the new law. This all-important agreement between the company, its members and its managers should actually say what the parties intend it to say. In 2015 it might not be doing so.