Florida Senate - 2021                              CS for SB 602
       
       
        
       By the Committee on Commerce and Tourism; and Senator Burgess
       
       
       
       
       
       577-02132-21                                           2021602c1
    1                        A bill to be entitled                      
    2         An act relating to business organizations; amending s.
    3         605.0410, F.S.; revising requirements relating to
    4         inspecting certain records of limited liability
    5         companies; amending s. 607.1301, F.S.; revising the
    6         definition of the term “accrued interest”; amending s.
    7         607.1302, F.S.; revising the circumstances under which
    8         shareholders are entitled to appraisal rights and
    9         certain payments; revising limitations relating to
   10         such rights and payments; revising applicability;
   11         amending s. 607.1303, F.S.; revising the circumstances
   12         in which certain shareholders may assert specified
   13         appraisal rights; amending s. 607.1321, F.S.; revising
   14         requirements for shareholders who wish to assert
   15         appraisal rights relating to specified corporate
   16         actions; amending s. 607.1322, F.S.; making a
   17         technical change; amending s. 607.1326, F.S.;
   18         entitling corporations to prepay a shareholder if the
   19         shareholder makes a demand for payment; specifying
   20         when interest is applicable to such prepayments;
   21         making technical changes; amending s. 607.1330, F.S.;
   22         revising requirements for proceedings relating to
   23         unsettled demands for payment; revising the
   24         eligibility requirements for shareholders entitled to
   25         the fair value of shares during court proceedings;
   26         making technical and conforming changes; amending s.
   27         607.1405, F.S.; revising the requirements for eligible
   28         entities to use the name of a dissolved corporation;
   29         amending s. 617.0725, F.S.; providing applicability;
   30         amending ss. 617.0825 and 617.1703, F.S.; revising
   31         applicability; providing an effective date.
   32          
   33  Be It Enacted by the Legislature of the State of Florida:
   34  
   35         Section 1. Paragraph (b) of subsection (3) of section
   36  605.0410, Florida Statutes, is amended to read:
   37         605.0410 Records to be kept; rights of member, manager, and
   38  person dissociated to information.—
   39         (3) In a manager-managed limited liability company, the
   40  following rules apply:
   41         (b) During regular business hours and at a reasonable
   42  location specified by the company, a member may inspect and
   43  copy:
   44         1. The records described in subsection (1); and
   45         2. Full information regarding the activities, affairs,
   46  financial condition, and other circumstances of the company as
   47  is just and reasonable if:
   48         a. The member seeks the information for a purpose
   49  reasonably related to the member’s interest as a member; and or
   50         b. The member makes a demand in a record received by the
   51  company, describing with reasonable particularity the
   52  information sought and the purpose for seeking the information,
   53  and if the information sought is directly connected to the
   54  member’s purpose.
   55         Section 2. Subsection (1) of section 607.1301, Florida
   56  Statutes, is amended to read:
   57         607.1301 Appraisal rights; definitions.—The following
   58  definitions apply to ss. 607.1301-607.1340:
   59         (1) “Accrued interest” means interest from the date the
   60  corporate action becomes effective until the date of payment, at
   61  the rate agreed to by the corporation and the shareholder
   62  asserting appraisal rights, or at the rate determined by the
   63  court to be equitable, which rate may not be greater than the
   64  rate of interest of interest determined for judgments pursuant
   65  to s. 55.03; however, if the court finds that the shareholder
   66  asserting appraisal rights acted arbitrarily or otherwise not in
   67  good faith, no interest shall be allowed by the court,
   68  determined as of the effective date of the corporate action.
   69         Section 3. Subsections (1) and (2) of section 607.1302,
   70  Florida Statutes, are amended to read:
   71         607.1302 Right of shareholders to appraisal.—
   72         (1) A shareholder of a domestic corporation is entitled to
   73  appraisal rights, and to obtain payment of the fair value of
   74  that shareholder’s shares, in the event of any of the following
   75  corporate actions:
   76         (a) Consummation of a domestication or a conversion of such
   77  corporation pursuant to s. 607.11921 or s. 607.11932, as
   78  applicable, if shareholder approval is required for the
   79  domestication or the conversion;
   80         (b) Consummation of a merger to which such corporation is a
   81  party:
   82         1. If shareholder approval is required for the merger under
   83  s. 607.1103 or would be required but for s. 607.11035, except
   84  that appraisal rights shall not be available to any shareholder
   85  of the corporation with respect to shares of any class or series
   86  that remains outstanding after consummation of the merger where
   87  the terms of such class or series have not been materially
   88  altered; or
   89         2. If such corporation is a subsidiary and the merger is
   90  governed by s. 607.1104;
   91         (c) Consummation of a share exchange to which the
   92  corporation is a party as the corporation whose shares will be
   93  acquired, except that appraisal rights shall not be are not
   94  available to any shareholder of the corporation with respect to
   95  any class or series of shares of the corporation that is not
   96  acquired in the share exchange;
   97         (d) Consummation of a disposition of assets pursuant to s.
   98  607.1202 if the shareholder is entitled to vote on the
   99  disposition, including a sale in dissolution, except that
  100  appraisal rights shall not be available to any shareholder of
  101  the corporation with respect to shares or any class or series
  102  if:
  103         1. Under the terms of the corporate action approved by the
  104  shareholders there is to be distributed to shareholders in cash
  105  the corporation’s net assets, in excess of a reasonable amount
  106  reserved to meet claims of the type described in ss. 607.1406
  107  and 607.1407, within 1 year after the shareholders’ approval of
  108  the action and in accordance with their respective interests
  109  determined at the time of distribution; and
  110         2. The disposition of assets is not an interested
  111  transaction;
  112         (e) An amendment of the articles of incorporation with
  113  respect to a class or series of shares which reduces the number
  114  of shares of a class or series owned by the shareholder to a
  115  fraction of a share if the corporation has the obligation or the
  116  right to repurchase the fractional share so created;
  117         (f) Any other merger, share exchange, disposition of
  118  assets, or amendment to the articles of incorporation, in each
  119  case to the extent provided as of the record date by the
  120  articles of incorporation, bylaws, or a resolution of the board
  121  of directors providing for appraisal rights, except that no
  122  bylaw or board resolution providing for appraisal rights may be
  123  amended or otherwise altered except by shareholder approval;
  124         (g) An amendment to the articles of incorporation or bylaws
  125  of the corporation, the effect of which is to alter or abolish
  126  voting or other rights with respect to such interest in a manner
  127  that is adverse to the interest of such shareholder, except as
  128  the right may be affected by the voting or other rights of new
  129  shares then being authorized of a new class or series of shares;
  130         (h) An amendment to the articles of incorporation or bylaws
  131  of a corporation, the effect of which is to adversely affect the
  132  interest of the shareholder by altering or abolishing appraisal
  133  rights under this section;
  134         (h)(i) With regard to a class of shares prescribed in the
  135  articles of incorporation in any corporation as to which that
  136  particular class of shares was in existence prior to October 1,
  137  2003, including any shares within that class subsequently
  138  authorized by amendment, and for classes of shares authorized on
  139  or after October 1, 2003, in any corporation with 100 or fewer
  140  shareholders prior to October 1, 2003, including any shares
  141  within that class subsequently authorized by amendment, any
  142  amendment of the articles of incorporation if the shareholder is
  143  entitled to vote on the amendment and if such amendment would
  144  adversely affect such shareholder by:
  145         1. Altering or abolishing any preemptive rights attached to
  146  any of his, her, or its shares;
  147         2. Altering or abolishing the voting rights pertaining to
  148  any of his, her, or its shares, except as such rights may be
  149  affected by the voting rights of new shares then being
  150  authorized of any existing or new class or series of shares;
  151         3. Effecting an exchange, cancellation, or reclassification
  152  of any of his, her, or its shares, when such exchange,
  153  cancellation, or reclassification would alter or abolish the
  154  shareholder’s voting rights or alter his, her, or its percentage
  155  of equity in the corporation, or effecting a reduction or
  156  cancellation of accrued dividends or other arrearages in respect
  157  to such shares;
  158         4. Reducing the stated redemption price of any of the
  159  shareholder’s redeemable shares, altering or abolishing any
  160  provision relating to any sinking fund for the redemption or
  161  purchase of any of his, her, or its shares, or making any of
  162  his, her, or its shares subject to redemption when they are not
  163  otherwise redeemable;
  164         5. Making noncumulative, in whole or in part, dividends of
  165  any of the shareholder’s preferred shares which had theretofore
  166  been cumulative;
  167         6. Reducing the stated dividend preference of any of the
  168  shareholder’s preferred shares; or
  169         7. Reducing any stated preferential amount payable on any
  170  of the shareholder’s preferred shares upon voluntary or
  171  involuntary liquidation;
  172         (i)(j) An amendment of the articles of incorporation of a
  173  social purpose corporation to which s. 607.504 or s. 607.505
  174  applies;
  175         (j)(k) An amendment of the articles of incorporation of a
  176  benefit corporation to which s. 607.604 or s. 607.605 applies;
  177         (k)(l) A merger, domestication, conversion, or share
  178  exchange of a social purpose corporation to which s. 607.504
  179  applies; or
  180         (l)(m) A merger, domestication, conversion, or share
  181  exchange of a benefit corporation to which s. 607.604 applies.
  182         (2) Notwithstanding subsection (1), the availability of
  183  appraisal rights under paragraphs (1)(a), (b), (c), (d), and
  184  (e), (f), and (h) shall be limited in accordance with the
  185  following provisions:
  186         (a) Appraisal rights shall not be available for the holders
  187  of shares of any class or series of shares which is:
  188         1. A covered security under s. 18(b)(1)(A) or (B) of the
  189  Securities Act of 1933;
  190         2. Not a covered security, but traded in an organized
  191  market (or subject to a comparable trading process) and has at
  192  least 2,000 shareholders and the outstanding shares of such
  193  class or series have a market value of at least $20 million,
  194  exclusive of the value of outstanding shares held by the
  195  corporation’s subsidiaries, by the corporation’s senior
  196  executives, by the corporation’s directors, and by the
  197  corporation’s beneficial shareholders and voting trust
  198  beneficial owners owning more than 10 percent of the outstanding
  199  shares; or
  200         3. Issued by an open end management investment company
  201  registered with the Securities and Exchange Commission under the
  202  Investment Company Act of 1940 and which may be redeemed at the
  203  option of the holder at net asset value.
  204         (b) The applicability of paragraph (a) shall be determined
  205  as of:
  206         1. The record date fixed to determine the shareholders
  207  entitled to receive notice of the meeting of shareholders to act
  208  upon the corporate action requiring appraisal rights, the record
  209  date fixed to determine the shareholders entitled to sign a
  210  written consent approving the corporate action requiring
  211  appraisal rights, or, in the case of an offer made pursuant to
  212  s. 607.11035, the date of such offer; or
  213         2. If there will be no meeting of shareholders, no written
  214  consent approving the corporate action, and no offer is made
  215  pursuant to s. 607.11035, the close of business on the day
  216  before the consummation of the corporate action or the effective
  217  date of the amendment of the articles, as applicable.
  218         (c) Paragraph (a) is not applicable and appraisal rights
  219  shall be available pursuant to subsection (1) for the holders of
  220  any class or series of shares where the corporate action is an
  221  interested transaction.
  222         (d)For the purposes of subparagraph (a)2., a comparable
  223  trading process exists if:
  224         1.The market price of the corporation’s shares is
  225  determined at least quarterly based on an independent valuation
  226  and by following a formalized process that is designed to
  227  determine a value for the corporation’s shares that is
  228  comparable to the value of comparable publicly traded companies;
  229  and
  230         2.The corporation repurchases the shares at the price set
  231  by its board of directors based upon the independent valuation
  232  and subject to certain terms and conditions established by the
  233  corporation and provides the corporation’s shareholders with a
  234  trading market comparable to that typically available had the
  235  corporation’s shares been traded in an organized market.
  236         Section 4. Subsection (1) of section 607.1303, Florida
  237  Statutes, is amended, and paragraph (c) is added to subsection
  238  (2) of that section, to read:
  239         607.1303 Assertion of rights by nominees and beneficial
  240  owners.—
  241         (1) A record shareholder may assert appraisal rights as to
  242  fewer than all the shares registered in the record shareholder’s
  243  name but owned by a beneficial shareholder or a voting trust
  244  beneficial owner only if:
  245         (a) The record shareholder objects with respect to all
  246  shares of the class or series owned by the beneficial
  247  shareholder or the voting trust beneficial owner;
  248         (b)The particular beneficial shareholder or voting trust
  249  beneficial owner acquired all such shares before the record date
  250  established under s. 607.1321 in connection with the applicable
  251  corporate action; and
  252         (c)The record shareholder and notifies the corporation in
  253  writing of its the name and address (if the record shareholder
  254  beneficially owns the shares as to which appraisal rights are
  255  being asserted) or notifies the corporation in writing of the
  256  name and address of the particular of each beneficial
  257  shareholder or voting trust beneficial owner on whose behalf
  258  appraisal rights are being asserted.
  259  
  260  The rights of a record shareholder who asserts appraisal rights
  261  for only part of the shares held of record in the record
  262  shareholder’s name under this subsection shall be determined as
  263  if the shares as to which the record shareholder objects and the
  264  record shareholder’s other shares were registered in the names
  265  of different record shareholders.
  266         (2) A beneficial shareholder and a voting trust beneficial
  267  owner may assert appraisal rights as to shares of any class or
  268  series held on behalf of the shareholder only if such
  269  shareholder:
  270         (c)Acquired all shares of the class or series before the
  271  record date established under s. 607.1321 in connection with the
  272  applicable corporate action.
  273         Section 5. Subsections (1), (2), and (3) of section
  274  607.1321, Florida Statutes, are amended to read:
  275         607.1321 Notice of intent to demand payment.—
  276         (1) If a proposed corporate action requiring appraisal
  277  rights under s. 607.1302 is submitted to a vote at a
  278  shareholders’ meeting, a shareholder who wishes to assert
  279  appraisal rights with respect to any class or series of shares:
  280         (a) Must have beneficially owned the shares of such class
  281  or series as of the record date for the shareholders’ meeting at
  282  which the proposed corporate action is to be submitted to a
  283  vote;
  284         (b)Must deliver to the corporation before the vote is
  285  taken written notice of the shareholder’s intent, if the
  286  proposed corporate action is effectuated, to demand payment for
  287  all shares of such class or series beneficially owned by the
  288  shareholder as of the record date for the shareholders’ meeting
  289  at which the proposed corporate action is to be submitted to a
  290  vote if the proposed corporate action is effectuated; and
  291         (c)(b) Must not vote, or cause or permit to be voted, any
  292  shares of such class or series in favor of the proposed
  293  corporate action.
  294         (2) If a proposed corporate action requiring appraisal
  295  rights under s. 607.1302 is to be approved by written consent, a
  296  shareholder who wishes to assert appraisal rights with respect
  297  to any class or series of shares:
  298         (a)Must have beneficially owned the shares of such class
  299  or series as of the record date established for determining who
  300  is entitled to sign a written consent;
  301         (b)Must assert such appraisal rights for all shares of
  302  such class or series beneficially owned by the shareholder as of
  303  the record date for determining who is entitled to sign the
  304  written consent; and
  305         (c) Must not sign a consent in favor of the proposed
  306  corporate action with respect to that class or series of shares.
  307         (3) If a proposed corporate action specified in s.
  308  607.1302(1) does not require shareholder approval pursuant to s.
  309  607.11035, a shareholder who wishes to assert appraisal rights
  310  with respect to any class or series of shares:
  311         (a) Must have beneficially owned the shares of such class
  312  or series as of the date the offer to purchase is made pursuant
  313  to s. 607.11035;
  314         (b) Must deliver to the corporation before the shares are
  315  purchased pursuant to the offer a written notice of the
  316  shareholder’s intent to demand payment if the proposed corporate
  317  action is effected for all shares of such class or series
  318  beneficially owned by the shareholder as of the date the offer
  319  to purchase is made pursuant to s. 607.11035; and
  320         (c)(b) Must not tender, or cause or permit to be tendered,
  321  any shares of such class or series in response to such offer.
  322         Section 6. Paragraph (a) of subsection (2) of section
  323  607.1322, Florida Statutes, is amended to read:
  324         607.1322 Appraisal notice and form.—
  325         (2) The appraisal notice must be delivered no earlier than
  326  the date the corporate action became effective, and no later
  327  than 10 days after such date, and must:
  328         (a) Supply a form that specifies the date that the
  329  corporate action became effective and that provides for the
  330  shareholder to state:
  331         1. The shareholder’s name and address.
  332         2. The number, classes, and series of shares as to which
  333  the shareholder asserts appraisal rights.
  334         3. That the shareholder did not vote for or consent to the
  335  transaction.
  336         4. Whether the shareholder accepts the corporation’s offer
  337  as stated in subparagraph (b)4.
  338         5. If the offer is not accepted, the shareholder’s
  339  estimated fair value of the shares and a demand for payment of
  340  the shareholder’s estimated value plus accrued interest, if and
  341  to the extent applicable.
  342         Section 7. Section 607.1326, Florida Statutes, is amended
  343  to read:
  344         607.1326 Procedure if shareholder is dissatisfied with
  345  offer.—
  346         (1) A shareholder who is dissatisfied with the
  347  corporation’s offer as set forth pursuant to s. 607.1322(2)(b)4.
  348  must notify the corporation on the form provided pursuant to s.
  349  607.1322(1) of that shareholder’s estimate of the fair value of
  350  the shares and demand payment of that estimate plus accrued
  351  interest, if and to the extent applicable.
  352         (2) A shareholder who fails to notify the corporation in
  353  writing of that shareholder’s demand to be paid the
  354  shareholder’s stated estimate of the fair value plus accrued
  355  interest, if and to the extent applicable, under subsection (1)
  356  within the timeframe set forth in s. 607.1322(2)(b)2. waives the
  357  right to demand payment under this section and shall be entitled
  358  only to the payment offered by the corporation pursuant to s.
  359  607.1322(2)(b)4.
  360         (3)With respect to a shareholder who properly makes demand
  361  for payment pursuant to subsection (1), at any time after the
  362  shareholder makes such demand, including during a court
  363  proceeding under s. 607.1330, the corporation shall have the
  364  right to prepay to the shareholder all or any portion of the
  365  amount that the corporation determines to be due under s.
  366  607.1322(2)(b)3. and the shareholder shall be obligated to
  367  accept such prepayment.
  368         (a) If such prepayment is made within 90 days after the
  369  earlier of the date on which the appraisal notice is provided by
  370  the corporation under s. 607.1322(1) or the deadline date by
  371  which the appraisal notice is required to be provided by the
  372  corporation under s. 607.1322(2), accrued interest will be
  373  payable, if at all, to the shareholder entitled to appraisal
  374  rights, calculated and accrued from the date on which the
  375  corporate action became effective and only on amounts that are
  376  determined to be due to the shareholder and are above the amount
  377  so prepaid. Accrued interest will not be payable to the
  378  shareholder entitled to appraisal rights on the prepayment
  379  previously made to the shareholder by the corporation pursuant
  380  to this paragraph.
  381         (b) If such prepayment is made more than 90 days after the
  382  earlier of the date on which the appraisal notice is provided by
  383  the corporation under s. 607.1322(1) or the deadline date by
  384  which the appraisal notice is required to be provided by the
  385  corporation under s. 607.1322(2), the prepayment must include
  386  accrued interest on the amount of the prepayment, calculated at
  387  the rate of interest determined for judgments pursuant to s.
  388  55.03 and calculated and accrued from the date that the
  389  corporate action became effective through the date of the
  390  prepayment previously made to the shareholder by the corporation
  391  pursuant to this paragraph. In addition, accrued interest will
  392  be payable to the shareholder entitled to appraisal rights on
  393  such amounts, if any, determined to be due to the shareholder in
  394  excess of the prepaid amount, calculated and accrued from the
  395  date on which the corporate action became effective.
  396         Section 8. Subsections (1) and (5) of section 607.1330,
  397  Florida Statutes, are amended to read:
  398         607.1330 Court action.—
  399         (1) If a shareholder makes demand for payment under s.
  400  607.1326 which remains unsettled, the corporation shall commence
  401  a proceeding within 60 days after receiving the payment demand
  402  and petition the court to determine the fair value of the shares
  403  and accrued interest, if and to the extent applicable,
  404  calculated and accrued from the date the corporate action became
  405  effective and taking into account the amount of any prepayment
  406  previously made to the shareholder by the corporation pursuant
  407  to s. 607.1326(3) from the date of the corporate action. If the
  408  corporation does not commence the proceeding within the 60-day
  409  period, any shareholder who has made a demand pursuant to s.
  410  607.1326 may commence the proceeding in the name of the
  411  corporation.
  412         (5) Each shareholder entitled to appraisal rights who is
  413  made a party to the proceeding is entitled to judgment for the
  414  amount of the fair value of such shareholder’s shares as found
  415  by the court, plus accrued interest, if and to the extent
  416  applicable and as found by the court, taking into account the
  417  amount of any prepayment previously made to the shareholder by
  418  the corporation pursuant to s. 607.1326(3).
  419         Section 9. Subsection (5) of section 607.1405, Florida
  420  Statutes, is amended to read:
  421         607.1405 Effect of dissolution.—
  422         (5) Except as provided in s. 607.1422(4), the name of a
  423  dissolved corporation is not available for assumption or use by
  424  another eligible entity until 120 days 1 year after the
  425  effective date of dissolution unless the dissolved corporation
  426  provides the department with a record, signed as required by s.
  427  607.0120, permitting the immediate assumption or use of the name
  428  by another eligible entity.
  429         Section 10. Section 617.0725, Florida Statutes, is amended
  430  to read:
  431         617.0725 Quorum.—An amendment to the articles of
  432  incorporation or the bylaws which adds, changes, or deletes a
  433  greater or lesser quorum or voting requirement must meet the
  434  same quorum or voting requirement and be adopted by the same
  435  vote and voting groups required to take action under the quorum
  436  and voting requirements then in effect or proposed to be
  437  adopted, whichever is greater. This section does not apply to
  438  any corporation that is an association, as defined in s.
  439  720.301(9), or any corporation regulated under chapter 718 or
  440  chapter 719.
  441         Section 11. Subsection (9) of section 617.0825, Florida
  442  Statutes, is amended to read:
  443         617.0825 Board committees and advisory committees.—
  444         (9) This section does not apply to a committee established
  445  under chapter 718, chapter 719, or chapter 720 to perform the
  446  functions set forth in s. 718.303(3), s. 719.303(3), s.
  447  720.305(2), s. 720.303(2), or s. 720.3035(1), or s. 720.405,
  448  respectively.
  449         Section 12. Section 617.1703, Florida Statutes, is amended
  450  to read:
  451         617.1703 Application of chapter.—
  452         (1)(a)This chapter is applicable to a corporation that is
  453  an association as defined in and regulated by any of chapter 718
  454  regarding condominiums, chapter 719 regarding cooperatives,
  455  chapter 720 regarding homeowners associations, chapter 721
  456  regarding timeshares, or chapter 723 regarding mobile
  457  homeowners’ associations, except:
  458         1.For In the event of any conflict between the provisions
  459  of this chapter and chapter 718 regarding condominiums, chapter
  460  719 regarding cooperatives, chapter 720 regarding homeowners’
  461  associations, chapter 721 regarding timeshares, or chapter 723;
  462  or
  463         2.As otherwise provided for in chapter 718, chapter 719,
  464  chapter 720, chapter 721, or chapter 723.
  465         (b)If subparagraph (a)1. or subparagraph (a)2. applies
  466  regarding mobile home owners’ associations, the applicable
  467  provisions of such other respective chapters shall apply.
  468         (2) The provisions of ss. 617.0605-617.0608 do not apply to
  469  corporations regulated by any of the foregoing chapters or to
  470  any other corporation where membership in the corporation is
  471  required pursuant to a document recorded in the county property
  472  records.
  473         Section 13. This act shall take effect upon becoming a law.