This is the first of two articles that will address key changes to the Florida Business Corporation Act (Ch. 607 or FBCA) and to certain other Florida entity statutes. This first article is a condensed version of two out of four more extensive articles about the revised act that have been or will be posted on the web page of the Business Law Section's Chapter 607 Drafting Subcommittee at http://www.flabizlaw. org/committees-task-force/task-forces/chapter-607-subcommittee/.
The revised act (designated F.S. Ch. 2019-90) will become effective on January 1, 2020.
Florida's corporate statute (Part I of the FBCA) is largely modeled on the Revised Model Business Corporation Act. The Model Act is promulgated by the Corporate Laws Committee of the Business Law Section of the American Bar Association. Although the Model Act has changed extensively over the past 35 years, the FBCA has been overhauled only once (in 1989) and otherwise has endured patchwork amendments.
The revised act is the work of the Chapter 607 Drafting Subcommittee of the Corporations, Securities and Financial Services Committee of The Florida Bar's Business Law Section. The subcommittee's mission statement was to comprehensively study Florida's business corporation statute and to propose a more cohesive revision and set of amendments.
The revised act includes 1) changes based on the 2016 version of the Model Act; 2) language changes that make the statutory provisions more understandable and usable by those who have to work with the statute (including judges), including fixing existing statutory language; 3) changes that borrow parallel language and approaches from the Florida Revised Limited Liability Company Act (FRLLCA) for purposes of harmonizing the two statutes on issues where harmonization was considered appropriate; and 4) necessary corrections to cross references. It also retains certain non-Model Act provisions already contained in existing Ch. 607 and continues, in certain cases, to borrow language from the Delaware General Corporation Law (DGCL).
During the course of drafting the revised act, extensive input was secured from representatives of the Florida Department of State, Division of Corporations.
This revised act uses the term "chapter" to refer to Ch. 607, Parts I, II and III, and eliminates the use of the term "act."
As part of its work, the subcommittee has written an extensive commentary. A full version of Ch. 607, annotated with the changes made in the revised act and the commentary, is available for download at http:// flabizlaw.org.
The following highlights the most significant changes to the FBCA. The discussions below are grouped together by article of Ch. 607, and references to sections are to sections of the Florida Statutes.
Article 1: General Provisions
* Filings with the Department Generally --With respect to the process for filing documents with the department, as a general matter no substantive changes have been made.
* Correcting Filed Documents--Although the provisions in [section] 607.0124 are largely the same as under existing law, the language contained in subsection (1) of the existing statute, which provides that a document can only be corrected within 30 days of the date of filing, has been removed from the statute, thus allowing a correction to be made at any time--even many years after the fact. Of course, as under existing law, any such correction will not be retroactively effective against those persons relying on the uncorrected document and adversely affected by the correction.
* New Definitions (Including "Qualified Director")--There are many changes in the definitions provisions of Ch. 607. Most definitions appear in [section] 607.01401. Some of the new definitions come from the Model Act, others are derived from definitions already contained in FRLLCA, and a few are peculiar to Florida law.
A definition of "applicable county" in [section] 607.01401(3) has been added to make clear where proceedings must be brought by or against a corporation under various circumstances. The new "applicable county" definition creates a waterfall to identify the proper county where an action can take place.
The definition of "insolvent" in [section] 607.01401(42) has been modified to add a balance-sheet test to the definition. A definition of "authorized entity" has been added to clarify the types of entities that may act as the registered agent for a Florida corporation or for a foreign corporation authorized to transact business in Florida, including expressly adding limited liability companies.
The newly added definition of "qualified director" is used in the revised derivative action provisions of article 7, and in the revised director conflict of interest and indemnification provisions contained in article 8.
* Notices and Electronic Notices - The changes to [section] 607.0141 concerning the giving of notices adopt most of the changes made in the notice requirements in [section] 1.41 of the Model Act. With the substantial growth of electronic transmission (and a corresponding decline in mailed correspondence), a modernization of Ch. 607 was believed necessary.
Section 607.0141(6) in the revised act adds a clarification that if the corporation's articles or bylaws authorize notice or other communications to directors by way of electronic transmission, then no consent of a recipient director shall be required for the corporation to provide notice or other communication to the recipient director by electronic transmission.
Article 2: Incorporation
* Articles of Incorporation Generally --The changes that the revised act makes to the sections concerning articles of incorporation and bylaws do not effectively change the mandated requirements for articles of incorporation in Florida. As a result, most practitioners who employ their own form of articles of incorporation (rather than using the online preprinted form), will be able to continue to use their form under the revised act. Nevertheless, it still would be advisable for each practitioner to compare his or her existing form of articles of incorporation against the changes included in [section] 607.0202 of the revised act.
* Exclusive Forum Provisions Expressly Permitted in Articles of Incorporation and Bylaws--New subsection (2)(b)6 of [section] 607.0202 expressly permits articles of incorporation to include exclusive forum provisions, to the extent permitted by new [section] 607.0208. Similarly, new [section] 607.0206(4) authorizes bylaws to include exclusive forum provisions. Even though the subcommittee believed that exclusive forum provisions were already permissible under the generic catch-all language in [section] 607.0202(2)(d), because of extensive discussions about such provisions around the country and the fact that this authority is expressly included in both the DGCL and the Model Act, the express authority has been added.
* Fee-shifting Provisions Are Not...