Florida LLC Dissolution Statute: Everything You Need to Know
The Florida LLC Dissolution Statute is found in Chapter 605 of the Florida Statutes and repealed the LLC Act that existed as of January 1, 2015.3 min read
The Florida LLC Dissolution Statute, or the Revised LLC Act, is often known as the "New LLC Act." This is found in Chapter 605 of the Florida Statutes and repealed the LLC Act that existed as of January 1, 2015. This New Act has many similarities to the existing one but makes extensive changes when it comes to specific situations that affect limited liability companies in Florida. This act is based on the Revised Uniform Limited Liability Company Act of 2006.
What Does the New LLC Act Clarify?
The New Act defines what the grounds are for judicial dissolution. It also covers how custodians and receivers are appointed. The act does the following:
- Gets rid of a creditor's right to request dissolution for the court.
- Adds three additional bases for dissolution based on a member or manager petitioning.
- Allows a "deadlock sale provision."
2014 is the transition year where current LLCs can choose to have the new rules be applicable to them, while LLCs that formed in 2014 will follow the rules of the New LLC Act. Current LLCs won't be tied down by the New Act until January 1, 2015. Whether you're a manager or member of a current LLC or new LLC, this New Act will most likely affect the process of dissolution.
What Information Does the New LLC Act Contain?
There are provisions in the New Act that aren't waivable, and they are more widespread than the ones in the current LLC Act. The New Act says that the operating agreement must not change the following:
- The capacity of the LLC to sue or be sued in its name.
- The relevant law that governs LLCs.
- A person's power to dissociate.
- Dissolution grounds.
- Mandatory content for a plan of interest exchange, plan of merger, plan of domestication, or plan of conversion.
In addition, the operating agreement can't eliminate any duties of care and loyalty or an obligation of fair dealing and good faith. It also can't exonerate or relieve someone from liability for specific conduct regarding bad faith, and can't provide for a manager or member to be indemnified when they commit an act of bad faith.
What Are the Three Ways in Which a Court May Dissolve a Limited Liability Company?
The court can dissolve an LLC in three different ways. The first is through a proceeding that goes through the Department of Legal Affairs. The second way is by a proceeding by a member or manager of an LLC. The last way is a proceeding through the LLC itself under a dissolution that's voluntary. When going through the Department of Legal Affairs, the court can dissolve an LLC if it's been established that they got their articles of organization by fraud, or if the limited liability company has been found to abuse the authority that the law gave them.
What Are the Five Ways in Which a Member or Manager May Establish Ground for Judicial Dissolution?
During a proceeding by a member or manager, there are five different ways that the manager or member can declare judicial dissolution. These include the following:
- Finding that most of or all of the activities of a company is unlawful.
- Not having it be reasonably practicable to continue conformity with the operating agreement or articles.
- Finding the controlling members or managers have acted fraudulently or illegally.
- The assets of the company are being wasted or misappropriated, which causes injury to members or the business.
- The members or managers being deadlocked and unrepairable injury to the business is being suffered or threatened.
What Does the New LLC Act Contain?
The New Act permits judicial dissolution in case there's a deadlock between the members and managers that they're unable to break. Known as a "deadlock sale provision," it sets the standard on how to handle situations so the operating agreement explains what to do in case a deadlock occurs. If this deadlock happens regarding the LLC's management of affairs and activities, the deadlock sale provision will manage and fix the deadlock.
Examples of this include a governance change, buy-sell provision, forced sale or partition of the company, or a casting vote. This mechanism lets the members discuss a possible future deadlock so the unnecessary costs and uncertainty can be avoided.
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