Presented by David G. Budd and Charles C. Whittington, Shareholders, Grant Fridkin Pearson, P.A.
This paper is presented for the Florida corporation clients of GFP in Florida and other parts of the US and in Europe.
The Florida Business Corporation Act, Chapter 607, Florida Statutes (FBCA) was amended by the Florida Legislature in 2019 (Ch. 2019-90 Laws of Florida) and became effective January 1, 2020. We apologize for the delay in presenting this paper due to the Covid 19 shutdown.
The FBCA is based on the Model Business Corporation Act of the American Bar Association, as last revised in 2016 (MBCA). The business law of other states, notably Delaware was also reviewed. This legislation was the result of the hard work of the business law section of the Florida Bar.
As a result of this legislation, the FBCA was entirely updated and modernized. We will begin with a review of the basics of corporation law.
Briefly, a business corporation is a fictional, legal entity formed under a governmental act to engage in business for profit which may exist indefinitely and whose ownership or shareholders have limited liability. A business corporation is considered a “person” under Florida law.
To obtain the authority to operate as a corporation, the organizers, known as the “Incorporators”, file Articles of Incorporation (the Articles) with the Florida Department of State, (the Department). The Department publishes the requirements and provides forms.
Per statute, the requirements include: (i) the names and addresses of the Incorporators; (ii) the Corporate Name; (iii) the address of the Principal Office; (iv) the Capital Stock; and (v) the Registered Agent and Office.
The Corporate Name must include a designation to indicate it is a corporation, such as Incorporated or Inc., and must be distinguishable from the names of other entities on file with the Department.
The Principal Office may be within or outside the state of Florida.
Since a Florida corporation is a fictional entity, it is required to have a Registered Agent in Florida (who may be a natural person or a Florida entity formed for this purpose) who will accept notices and service of process (such as notice of a lawsuit) against the corporation. The Registered Agent must provide written acceptance of his duties in the Articles.
It is recommended that the corporation carefully select a Registered Agent who will understand the process and applicable procedures.
The description of the Capital Stock must set forth the number of shares the corporation will be authorized to issue.
The shares will be issued to shareholders who will be the owners of the corporation. Depending on the makeup of the corporation, the subject of capital stock can take on a life of its own, which is beyond the scope of this paper.
After the Department has accepted and filed the Articles, it is then time to hold the Organization Meeting of the corporation for the initial Directors to adopt the Bylaws, appoint the Officers, and conduct other business such as the approval to issue shares to the initial Shareholders.
The initial Directors can be named in an optional provision in the Articles or can be appointed by the Incorporators at the Organization Meeting.
A Shareholder may be a natural person or a legal entity. Going forward, the shareholders elect or appoint the Board of Directors.
A Director must be a natural person. The Board of Directors exercise the powers of the corporation and manage its business.
The Officers are, in turn, appointed and supervised by the Board of Directors. By statute, the Officers consist of a President and Secretary and conduct the usual, day to day business. Typically, corporations also have a Vice President and a Treasurer.
The Bylaws are the rules and regulations to govern and manage the affairs of the corporation, including provisions related to the Shareholders, Directors, and Officers.
Given all the changes to the FBCA, it is advisable that all existing Florida business corporations formed before January 1, 2020, the effective date of the Act, adopt fully amended and restated Bylaws that are consistent with the new FBCA. Further, you may need the new Bylaws for your ongoing banking, particularly if you seek refinancing.
This concludes our introduction to the FBCA. In a later post, we will address (i) the indemnification of the directors, officers, employees and agents of the corporation; (ii) mergers and alternatives; and (iii) the authority of a foreign corporation (formed in another US state) to do business in Florida.
If you have any questions about the FBCA or formation of a Florida corporation, please contact David G. Budd and Charles C. Whittington at 239-514-1000.