Business Law Section leads rewrite of Florida’s corporation statutes
After four years of study and work by the Business Law Section, a major overhaul of Florida corporation laws is moving through the House and Senate.
The revision of F.S. Chap. 607 “is largely an update and modernization of the corporate statutes with the goal of making our statute as clear as possible and making it have all the things that a modern corporation needs,” said Philip Schwartz, a former chair of the Business Law section who co-chaired the section subcommittee that worked on the project.
It’s based on the Model Business Corporate Act issued by the ABA in 2016. Schwartz, subcommittee Co-Chair Gary Teblum, and Sen. Kathleen Passidomo, R-Naples, who presented the SB 892 March 25 at the Senate Judiciary Committee meeting, all noted that Florida traditionally follows most of the model act for its corporate laws.
Passidomo said the 400-plus page bill deals with filing of corporate documents, proxies, service of process to the corporation, remote participation in shareholder meetings, tightens conflict of interest laws, deals with bankruptcies and appointing receivers, appraisal rights, and number of other matters. It also “harmonizes” sections of F.S. Chap. 607 on corporate names, registered agents, and qualifications to transact business in Florida, among other things, with the state’s laws on limited liability companies, not-for-profit corporations, and partnerships to limit conflicts as far as practical.
The last time the corporation statutes were thoroughly overhauled was more than 30 years ago, Teblum and Schwartz said. Although there have been intervening tweaks and updates, “We felt it was time to do a comprehensive amendment to the Florida corporation statutes, to bring it up to date and remain competitive with other states,” Teblum said.
The section’s review began in 2015, and then reset when the model act was revised and released by the ABA in 2016. The review included input from the Department of State, which oversees corporations, and the end product is supported by the Tax and Real Property, Probate, and Trust Law sections.
While the law and the changes may seem arcane, it will have an important effect.
“Because Florida is now up to date and has a more flexible corporation statute, people who say, ‘Well, don’t incorporate in Florida, incorporate in Delaware,’ they will stay here,” Teblum said. “They will be more likely to represent themselves as a Florida corporation.”
Schwartz said the section routinely reviews business related statutes, and worked on the last update to the corporation laws in the late-80s, to the general partnership laws in the mid-90s, to the limited partnership laws in the 2000s, and to the limited liability company laws in 2013.
While most business entities form as LLCs, in 2017 there were well over 700,000 corporations in Florida, Schwartz said. Around 100,000 new corporations register each year, although that number is offset by tens of thousands that close, go bankrupt, or are administratively terminated because they fail to file required annual reports.
SB 892 passed the Senate Judiciary 6-0 and had already passed the Commerce and Tourism Committee. It next goes to the Rules Committee and then to the Senate floor. It’s House counterpart, HB 1009, sponsored by Rep. Cord Byrd, R-Jacksonville Beach, has passed the Civil Justice Subcommittee and is in the Judiciary Committee. If it passes there, it will go to the House floor.
