Fairness standards that are used to determine whether or not a contract is fair and reasonable to an LLC are clarified in the new Florida LLC act. The Existing Act did not provide any standards to determine if a transaction was considered fair and reasonable. The new changes offer more guidance in this area. Under these new provisions, a transaction will generally be considered fair if it is beneficial to the LLC and its members as a whole.
The Existing Act offered protections for a conflict of interest transaction as long as it is considered to be “fair and reasonable” at the time it is authorized. The Existing LLC Act also allowed for liability protections even if the fairness requirement was not met, as long as disinterested managers or members had full disclosure of the transaction.
The New LLC Act requires any transaction to be “fair to the LLC” even if it is approved by members or managers who are disinterested. In determining fairness, the New LLC Act takes into account whether or not the transaction in question is comparable to an independent arms-length transaction. Also, the New LLC Act clarifies the party that has the burden for proving fairness when there is a challenge to the validity of a transaction due to a conflict of interest.
The new LLC Act offers specific standards that are used to determine the fairness of a potential conflict of interest transaction, and does away with the vague “reasonableness” test. A Fort Lauderdale business acquisition & sales attorney can explain these fairness requirements to you and how they apply to your LLC in more detail.
The New LLC Act is a Default Statute
Just like the existing law, the New Act offers a number of rules that will apply in the case of an LLC not having an operating agreement. Your Fort Lauderdale business acquisition & sales attorney can explain these default rules to you.
For instance if the operating agreement or articles of organization of an LLC do not express whether or not the LLC is “manager managed” or “member managed” it will be automatically classified as “member managed”. A Fort Lauderdale business acquisition & sales attorney can explain default provisions to you as well as some of the non-waivable provisions.
Contact a Fort Lauderdale Business Acquisition & Sales Attorney Today
Mark Schecter at Schecter Law is an experienced Fort Lauderdale business acquisition & sales attorney. Contact our offices today to discuss your specific situation.