The Florida Legislature recently adopted amendments to chapter 605 of the Florida Revised Limited Liability Company Act (the “Act”) which will generally go into effect July 1, 2015. The amendments were passed to correct inconsistencies or “glitches” in the Act.  These changes are important because they change the underlying assumptions for your limited liability company (“LLC”).  The changes are outlined below. 

Expanded Fiduciary Duties. The fiduciary duties of LLC members and managers are expanded through the application of the common law principles of loyalty and care. Specifically, unless your LLC operating agreement or LLC articles of organization state that fiduciary duties of the members and managers are in some way eliminated or restricted, these common law principles will apply under the updated Act. Based off of this change, you should consider revising your LLC operating agreement and add language to restrict or eliminate these expanded fiduciary duties.

Power of Disassociation. Prior to the amendments, the Act did not permit an operating agreement to limit an individual's ability to disassociate.  The amendment provides that operating agreements can explicitly limit an individual's ability to disassociate. You may want to consider this as an option in your current or future LLC operating agreements.

Appraisal Rights Exception. Under the old Act, an appraisal event may not be contested with the exception of three scenarios: the appraisal event was (i) not approved in accordance with the Act, the operating agreement of the LLC, or the resolutions authorizing the appraisal event; (ii) was procured as a result of fraud, a material misrepresentation, or an omission of a material fact; or (iii) is an interested party transaction. The amendment removes the third exception.  Appraisal rights are now the sole and exclusive remedy in most transactions in which appraisal rights are available, including interested party transactions. 

Imputed Knowledge in Real Estate Transactions.

Under the old Act, if a limitation is described in the LLC’s articles of organization, a third-party is deemed to have knowledge of this limitation. Based off of feedback from the Florida Bar, the amendments have limited this section in certain real estate transactions. That is, third parties are no longer presumed to have knowledge of limitations of a person’s authority to transfer real estate owned by the LLC unless such limitation is in an affidavit, certificate, or other instrument recorded in the clerk’s office.