This is the second of two articles published in the Journal addressing key changes made to the Florida Business Corporation Act (Ch. 607 or FBCA) and to certain other Florida entity statutes (the revised act). The first article was published in the November/December 2019 edition of the Journal. This second article is a condensed version of two out of four more extensive articles about the revised act that have been posted on the web page of the Ch. 607 Drafting Subcommittee, which is contained on the website of The Florida Bar Business Law Section, www.flabizlaw.org.
Florida's corporate statute (Part I of the FBCA) is largely modeled on the Revised Model Business Corporation Act (Model Act). The revised act includes 1) changes based on the 2016 version of the Model Act; 2) clarifying and correcting language changes; and 3) harmonizing changes from the Florida Revised Limited Liability Company Act (FRLLCA). 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).
The following highlights changes to the FBCA made in the revised act in articles 9 through 16 of the FBCA. The discussions below are grouped together by article. The revised act is effective January 1, 2020.
Article 9: Anti-Takeover Provisions
The revised act makes changes to [section] 607.0901 (the affiliated transaction statute) to bring it into conformity with changes made in the DGCL and in the corollary Maryland and Michigan statutes. No changes were made in the revised act to [section] 607.0902 (the control-share acquisition statute).
Article 10: Amendment of Articles of Incorporation and Bylaws
* Shares; Combination or Division --FBCA [section] 607.10025 (a non-Model Act provision) currently authorizes a Florida corporation with more than 35 shareholders to effect a forward stock split or a reverse stock split without shareholder approval under certain circumstances. The revised act removes the more than 35-shareholder limitation.
* Amendment to Articles of Incorporation; Shareholder Approval --Besides changes to conform this section to the corollary Model Act provision, [section] 607.1003 now requires that a full copy of a proposed amendment be provided to the shareholders for consideration, and no longer allows just a summary.
* Restated Articles of Incorporation --Section 607.1007 continues to address restated articles of incorporation. While significant language changes were made to [section] 607.1007, the changes are not considered substantive. Practitioners should be careful, however, because these changes may require adjustments to the forms used for restatements.
* Bylaw Provisions Relating to the Election of Directors--New [section] 607.1023, dealing with bylaws addressing election of directors and concepts of majority voting and holdover directors, has been added. This new provision is intended for use mostly by public companies.
Article 11: Mergers, Share Exchanges, Domestications, and Conversions
* General Overview--In the Model Act, mergers and share exchanges are addressed in article 11 and domestications and conversions are addressed in article 9. The FBCA as in effect prior to the revised act included mergers, share exchanges, and conversions in article 11 (existing [section][section] 607.1101-607.11101) and domestications in a standalone provision ([section] 607.1801). Because article 9 of the FBCA already contained two non-Model Act anti-takeover provisions, the revised act continues to include mergers, share exchanges, and conversions in article 11 and brings domestications into article 11.
The structure of these merger, share exchange, domestication, and conversion provisions are significantly changed from the existing FBCA provisions. Under the revised act, the merger and share exchange provisions are in [section][section] 607.1101-607.1107, the domestication provisions are in [section][section] 607.607.11920-607.11924, and the conversion provisions are in [section][section] 607.11930-607.11935.
Although much of the prior law's general process for effectuating a merger, share exchange, domestication, or conversion has been incorporated into the revised act, because the structure and organization of the provisions concerning these organic transactions have changed significantly, practitioners would be well advised to study the provisions of article 11 of the revised act very carefully. Practitioners also should fine tune the operative documents they use in effectuating such transactions to conform to the revised act.
* Overview of Mergers and Share Exchanges--In restructuring the merger and share exchange provisions to match the structure of the Model Act, the revised act moves all of the different types of merger and share exchange transactions into [section] 607.1101 and [section] 607.1102, respectively.
In [section] 607.1101 and [section] 607.1102 of the revised act, the requirements of the plan of merger and plan of share exchange are expanded 1)to make clear that not only can the terms of a merger or share exchange effectuate a conversion of shares of the corporation, but can also effectuate a conversion of rights to acquire shares of the corporation; and 2) to list out the various broad list of types of property (in addition to shares) into which shares and rights to acquire shares can be converted by virtue of the merger or share exchange.
* Adopting a Plan of Merger or Share Exchange--The process for adopting a plan of merger or share exchange is addressed in [section] 607.1103. Among other changes, this section as revised is designed to correct a long-standing ambiguity under Florida law that arguably would allow any class or series of shares to have a separate class vote on a merger or share exchange even under circumstances where the articles of incorporation provide otherwise.
The revised exception in subsection (2) is intended to allow a shareholder vote without a recommendation from the board of directors where there is a "force the vote" provision in a plan of merger or share exchange.
Subsection (5) continues the requirement that a majority of the shares entitled to vote at the meeting (i.e., an absolute majority, rather than just a majority of the quorum) must approve the merger or share exchange.
* Shareholder Approval of a Merger or Share Exchange in Connection with a Tender Offer--New [section] 607.11035 is derived from [section] 11.04(j) of the Model Act. Similar to the Model Act and the DGCL, this provision allows for a "two-step" transaction in which the offeror first makes a tender offer to shareholders through which it acquires enough of an interest in the corporation to satisfy the shareholder approval that otherwise would be required, and then allows the board of directors to effectuate what is often called a "mop-up" merger or share exchange without the need to further secure shareholder approval.
* Merger Between Parent and Subsidiary or Between Subsidiaries --The short-form merger provision in [section] 607.1104, which allows for certain mergers without the need to secure shareholder approval, is extensively modified. Among other changes, the revised act eliminates the 30-day advance notice...