The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Rules
BILL: CS/SB 1198
INTRODUCER: Commerce and Tourism Committee and Senator Martin
SUBJECT: Corporate Actions
DATE: February 7, 2024
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Baird McKay CM Fav/CS
2. Baird Twogood RC Pre-meeting
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 1198 provides a statutory ratification procedure for corporate actions that may not have
been properly authorized and for shares that may have been improperly issued. These improperly
authorized corporate actions, that would otherwise be proper, are called defective corporate
actions.
The bill provides a statutory ratification process that is intended to supplement common law
ratification. Subsequent ratified defective corporate actions, under these proposed provisions,
would remain subject to equitable review. The ratification procedure is intended to be available
only where there is objective evidence that a corporate action was defectively implemented. The
bill gives specified affected parties the ability to file motions in the circuit court of the applicable
county.
The bill also provides a statutory method, through filing a single composite statement, for a
registered agent to resign from more than one corporate entity at a time, if the specified entity
has been dissolved, administratively or voluntarily, for 10 years or longer. The bill applies to the
following business entity types:
Limited liability companies or a foreign limited liability companies;
Corporations; and
Corporations not for profit.
The bill keeps the fee to file the registered agent resignation the same for the listed above
business entity types, even if filing to resign from more than one entity at a time.
REVISED: BILL: CS/SB 1198 Page 2
The bill takes effect July 1, 2024.
II. Present Situation:
Corporations that do business within Florida are governed by the requirements laid forth in the
Florida Business Corporation Act, a law that is modeled after the Model Business Corporation
Act (MBCA) promulgated by the American Bar Association (ABA) in 1950.
1
The general
business law community, headed by groups like the ABA and the Florida Bar Business Law
Section (Business Law Section), are continually participating in collaborative efforts to make
corporate laws clearer and pragmatic.
Limited Liability Companies (Chapter 605)
A Limited Liability Company (LLC) is a type of business entity recognized by and regulated
under chapter 605, F.S., the Florida Revised Limited Liability Company Act. Benefits to forming
a business as an LLC include a flexible tax structure and a vertical liability shield, which limits
the personal liability of the LLC’s members and managers for company obligations. Currently,
LLCs are the most popular business entity in Florida, with over 2 million active LLCs as of
2023.
2
Corporations for Profit (Chapter 607)
A for profit corporation is a type of business entity recognized and regulated under chapter 607,
F.S. In order for a corporation to organize, the entity must file articles of incorporation, including
specifics such as a corporate name, address, number of shares, and the designation of a registered
office and agent.
3
Corporations Not for Profit (Chapter 617)
A corporation not for profit is a type of business entity recognized and regulated under chapter
617, F.S. The structure of corporations not for profit are similar to for profit corporations,
needing the filing of articles of incorporation.
The Department of State
The Department of State (DOS) is the state’s central location responsible for receiving and
maintaining a number of corporate records. Florida law requires certain documents to be filed
with the Division of Corporations (division) of the DOS in order for a business to be organized
as a corporation, partnership, LLC, or other business/commercial entity. Business entities can file
these documents and check their status through an internet portal that is maintained by the
division.
1
See generally Section 607, F.S.
2
Florida Department of State, Division of Corporations Yearly Statistics, available at https://dos.fl.gov/sunbiz/about-
us/yearly-statistics/ (last visited January 2024).
3
Section 607.0202, F.S. BILL: CS/SB 1198 Page 3
Fees
In order to help maintain these records, the DOS is statutorily allowed to collect fees. Florida’s
fee requirements for business entities are some of the most competitive in the United States;
where a corporation in Delaware (the state with the most incorporations, because of their
notoriously pro-business laws) will pay no less than $175 and no more than $200,000 in annual
fees, Florida only requires an aggregate of $150 in fees per year.
4
In 2013, the Legislature passed a law to make fees more uniform across the various business law
chapters. However, each specific type of business entity should be aware of the various fees
associated with their respective business organization chapter.
The relevant fees for the bill are as follows:
5
Corporation Fees
New Florida/Foreign Corporation
Filing Fees $35.00
Registered Agent Designation $35.00
Annual Reports
Annual Report of a For Profit Corporation $150.00
Annual Report of Not For Profit Corporation $61.25
Resignation of Agent
Resignation of Registered Agent of an Active Corporation $87.50
Resignation of Registered Agent of an Administratively
Dissolved/Voluntarily Dissolved/Withdrawn Corporation/Inactive
Corporation
$35.00
Limited Liability Company Fees
New Florida/Foreign LLC
Filing Fee $100.00
Registered Agent Designation Fee $25.00
Annual Reports
Annual Report $138.75
Resignation of Agent
Resignation of Registered Agent for an active LLC $85.00
Resignation of Registered Agent for a dissolved/inactive LLC $25.00
4
U.S. Securities and Exchange Commission, Schedule 14-A, Saga Communications, Inc. Proxy Statement (Apr. 16, 2020),
available at https://www.sec.gov/Archives/edgar/data/0000886136/000110465921050534/tm2111304-1_def14a.htm, (last
visited January 22, 2024).
5
The Florida Department of State, Division of Corporations, Fees, available at https://dos.fl.gov/sunbiz/forms/fees/, (last
visited January 22, 2024). BILL: CS/SB 1198 Page 4
Defective Corporate Actions
Under the Florida Business Corporation Act, there are certain requirements that a corporation
must establish in order to be considered a valid corporation and properly authorized. For
instance, a corporation must file its articles of incorporation with the DOS to transact business in
the state. If a corporation does not file those articles of incorporation or does not include the
requirements of the articles of incorporation, they are not entitled to filing by the department and
may be considered an invalid corporation.
6
Additionally, a corporation could have filed all documents correctly, but made an error in the
appointment of their board of directors. Subsequent actions by the corporation, after that
incorrect appointment of the board of directors, may be considered invalid. Another potential
scenario of a defective corporate action may arise when a corporation issues shares but did not
adhere to the correct share issuing guidelines. Any subsequent action, after that incorrect share
issuance, may be considered invalid.
Being an invalid corporation can also be referred to as being a defective corporation or an
unauthorized corporation. However, because of their nature, corporations, whether it be the
incorporator, the board of directors, an officer or agent of the corporation, or the shareholders,
can take actions even though the corporation is technically defective, unauthorized, or invalid.
When an unauthorized or defective corporation takes an action, such as improperly issuing
shares, a legal situation can arise. For example, a corporation that is trying to make a business
deal with another entity or raise capital usually has to reveal certain corporate records for the
other parties due diligence, discovering a defective corporate action can immediately halt a
transaction or potential transaction. If a business deal has already been agreed upon prior to the
discovering the defective corporate action, legal issues can arise.
Currently, disputed acts or defective share issuances that are carried out by a defective or
unauthorized corporation are governed by common law in the court system. These disputes can
cost business entities time and money to resolve, in addition to the time and resources that have
to be allocated by the state via the court system.
Amending Articles of Incorporation
The articles of incorporation govern a corporation. A corporation can amend or add as many
articles of incorporation as necessary.
7
The amendment of an articles of incorporation must be
adopted and approved. The adopting and approving can be done several ways, including, through
the provided method in the articles of incorporation, either by the incorporators or board of
directors, if shareholder action is not required, or by the shareholders or shareholders through
voting groups.
8
6
Section 607.0120(1), F.S.
7
Section 607.1001, F.S.
8
Section 607.1003(1-9), F.S., provides various methods for amending the articles of incorporation. BILL: CS/SB 1198 Page 5
The amendment can be done in one single amendment form for a fee of $35.00.
9
This form,
called the articles of amendment form, must be signed and delivered to the DOS, among other
specific requirements laid out in statute.
10
Active vs Dissolved Business Entities
The division annually assigns an accompanying status to business entities based on that business
entities’ filings and payment of fees. When a business entity pays their filing fees and files their
initial required filings, (for an LLC it is their articles of organization, and for a corporation it is
their articles of incorporation) the division will review the filings and if everything is satisfied
the business entity will be assigned an “active” status.
After the initial filings to begin the business entity, a business entity is considered “active” when
it has filed the annual report and paid the associated fee. Typically in the fall, the division will go
through all of their filings and determine if a business entity is up to date in all of their filings
and fees. If the division does not have the required information and associated fee on record they
will assign the business entity an “inactive” status and the business entity will be
administratively dissolved or administratively revoked.
11
A business entity can determine their status by logging in to the online portal operated by the
DOS, or they can file and pay to have the DOS send them a certificate of status, for a $5 fee for
an LLC or an $8.75 fee for a corporation.
12
A business entity may file a reinstatement application, accompanied with the associated fee, to
reactivate their business status and become an “active” business entity again.
Registered Agents
Generally, one of the statutory requirements that a business entity must meet is designating a
registered agent.
13
A registered agent must be an individual who resides in this state whose
business address is identical to the address of the registered office.
14
The registered agent must
also be available at that Florida address during normal business hours and promptly forward any
significant legal or state documents to the business. Registered agents are required to serve as the
contact for the business entity that receives service of process, legal notifications, and other
official state documents for a business entity.
The DOS is required to maintain an accurate record of the registered agent and registered office
for service of process, and must promptly furnish any information disclosed thereby upon request
and payment of the required fee.
15
An individual within the business may serve as the entity’s
9
Florida Department of State, Division of Corporations, Articles of Amendment form, available at
https://form.sunbiz.org/pdf/cr2e011.pdf, (last visited on January 22, 2024).
10
Section 607.1006, F.S.
11
Note that a general partnership is not required to file an annual report or pay an annual report fee.
12
For LLCs see section 605.0213(12), F.S. and for Corporations see section 607.0122(19), F.S.
13
Section 607.0501, F.S.
14
Id.
15
Id. BILL: CS/SB 1198 Page 6
registered agent. Additionally, a business entity with an active Florida filing or registration may
serve as a registered agent, however an entity cannot serve as its own registered agent.
Additionally, if a business entity does not appoint and maintain a registered agent, the DOS may
administratively dissolve that business entity.
16
In Florida, a registered agent is required for the following:
Limited Liability Companies;
Corporation/Foreign Corporation (for profit);
Corporation/Foreign Corporation (not for profit);
Limited Partnerships (domestic and foreign); and
Limited Liability Partnerships (domestic and foreign).
17
In order for a registered agent to resign as the registered agent of the business entity, the
registered agent must complete a specific form, accompanied by the payment of the fee, and mail
it in to the division. Currently, a registered agent must pay a separate fee to resign as a registered
agent of each business entity, separately.
III. Effect of Proposed Changes:
Ratification of Defective Corporate Actions
Sections 1 through 6 create new sections of law detailing the required procedures for ratifying a
defective corporate action.
Section 7 of the bill creates filing requirements for ratifying a defective corporate action.
Section 8 of the bill creates law contemplating the jurisdiction and process for judicial
proceedings regarding the validity of corporate actions.
Procedural Requirements
Section 1 creates s. 607.145, F.S., defining the following terms, among others, as:
“Corporate action” meaning any action taken by or on behalf of a corporation, including any
action taken by the incorporator the board of directors, a committee of the board of directors,
an officer or agent of the corporation, or the shareholders;
“Defective corporate action” meaning any corporate action purportedly taken which is, and at
the time such corporate action was purportedly taken would have been, within the power of
the corporation, but is void or voidable due to a failure of authorization; or an overissue; and
“Failure of authorization” meaning the failure to authorize, approve, or otherwise effect a
corporate action in compliance with this chapter, the corporation’s articles of incorporation
16
For limited partnerships Section 620.1809, F.S. governs.
17
Note that a general partnership is not required to have a registered agent. Section 620.8301, F.S., states that each general
partner is an agent of the partnership. (Note that a general partnership can still designate a separate registered agent, through
their initial general partnership registration form, but partners of the general partnership are deemed to be agents and
therefore the statutes do not require a general partnership to have a registered agent.) BILL: CS/SB 1198 Page 7
or bylaws, a corporate resolution, or any plan or agreement to which the corporation is a
party, if and to the extent such failure would render such corporate action void or voidable.
Section 2 creates s. 607.0146, F.S., providing that a defective corporate action is not void or
voidable if the defective corporate action was ratified (under the ratification requirements that
are being created in section 607.0147, F.S.) This section of the bill also emphasizes that the
ratification process for a defective corporate action is not the exclusive means of ratifying or
validating any defective corporate action.
Additionally, the bill provides that an overissue of shares over and above the number authorized
in the corporation’s articles of incorporation can be remedied by the adoption of an amendment
to the articles of incorporation or other corporate action that authorizes or creates the putative
shares that resulted in the overissue. This provision enables a corporation to cure an overissue
occurring when shares have been duly authorized but are issued before articles of amendment are
filed.
Section 3 creates s. 607.0147, F.S., which sets forth the steps that a corporation must use to
remedy a defective corporate action. This includes stating:
The defective corporate action to be ratified;
The number and type of putative shares purportedly issued (if shares were issued);
The date of the defective corporate action;
The nature of the failure of authorization; and
The approval of the ratification of the defective corporate action by the board of directors.
This bill also sets forth a similar mechanism as listed above but for a scenario where the
defective corporate action to be ratified relates to the election of the initial board of directors of
the corporation. In this described scenario the bill provides that after the board of directors takes
action it must refer the matter to shareholders for approval. This section clarifies that the board
of directors may abandon ratification even after approval without further action.
Section 4 creates s. 607.0148, F.S., which sets forth specific procedural requirements for the
ratification of defective corporate actions. The bill provides that the board of directors are subject
to the same quorum and voting requirements for the ratification process that exist at the time
such ratifying action is taken and that notice, of whether the defective corporate action is to be
ratified at a meeting or by written consent, is required to be given to shareholders. The bill also
provides notice requirements for whether the corporate action is to be ratified by written consent.
If the shareholders are meeting to ratify the election of a director, or if the ratification is through
written consent, the bill requires that it must be approval by a majority vote. The bill clarifies
that putative shares existing on the record date are only entitled to notice of matter relating to
ratification and that such shares are not entitled to vote, are not counted for quorum purposes,
and are not counted in any written consent and that to ratify putative shares, an amendment to the
articles of incorporation must be approved.
Section 5 creates s. 607.0149, F.S., detailing notice requirements to shareholders and holders of
putative shares when shareholder action to approve the ratification of the defective corporate
action is not required. The bill requires “prompt” notice to shareholders following the ratification BILL: CS/SB 1198 Page 8
of a corporate action by the board of directors. The bill provides for exceptions to the notice
requirements, such as that notice is not required to be submitted to shareholders for approval if
notice is given pursuant to s. 607.0148(2), F.S., and a disclaimer that notice required by this
section may be given in any manner that is authorized under section 607.0141, F.S, and in the
case of a public company, notice may be given by any means required by the United States
Securities and Exchange Commission.
Section 6 creates s. 607.0150, F.S., which sets forth how a ratification, upon proper notice,
affects the corporation and the timing of any ratification. The bill provides that where a defective
corporate action is properly ratified, it is deemed no longer void or voidable and is deemed for all
intents and purposes to be a validly approved corporate action, effective as the date of the
original defective act. Similarly, the bill provides that issuances of putative shares, or fractions of
putative shares, are deemed to be issuances of identical valid shares, or fractions of shares, on the
date on which the mentioned shares were purportedly issued.
This section clarifies that any corporate action that was taken, subsequent to the defective
corporate action that was ratified pursuant to statute, in reliance on such defective corporate
action and any subsequent defective corporate action resulting directly or indirectly from such
original defective corporate action, is valid as of the respective time such corporate action was
taken.
Filing Requirements
Section 7 creates s. 607.0151, F.S., which establishes a new filing requirement (articles of
validation) for defective corporate actions ratified that would have normally required a filing,
regardless of whether or not the filing was properly made. The bill provides specific
requirements for the content of the articles of validation, including that the articles of validation
must be filed with the DOS and that the articles of validation will serve to amend or be a
substitute for any other filings related to the defective corporate action.
Judicial Proceedings
Section 8 creates s. 607.0152, F.S., conferring jurisdiction on the circuit court in the applicable
county to hear and determine claims regarding the validity of any corporate action. The bill
provides that it can be a successor thereto, a director of a corporation, or any shareholder of the
corporation that can make the filing to a court to determine the validity of any corporate action
and that when the filing is made, the court may make any findings or orders it deems proper
under the circumstances.
This section of the bill clarifies that service of process for any of these such proceedings should
follow the same rules as set forth in Chapter 48, F.S., and that any action brought forth must be
done so within 120 days after the validation effective time. Additionally, this section of the bill
sets forth a non-exclusive list of various factors that may be considered by the court and certain
actions that the court may decide for determinations on the validity of the challenged corporate
action.
BILL: CS/SB 1198 Page 9
Resignation of a Registered Agent
Sections 9 through 11 amend the requirements for the resignation of a registered agent.
Sections 12 through 14 amend the associated fees for the resignation of a registered agent.
Section 9 amends s. 605.0115, F.S., to redesignate certain subsections and create a mechanism
for a registered agent to resign as the registered agent of more than one dissolved limited
liability company or inactive foreign limited liability company, that has been dissolved for 10
years or longer, through a single composite statement. Additionally, the bill sets forth
requirements that the composite resignation statement should contain the name of each dissolved
company and the date of the respective companies dissolution. The resignation statement, or
composite resignation statement, if resigning from two or more companies at a time, once filed
with the DOS, must also be delivered to the company or each respective companies’ current
mailing address as it appears in the records of the DOS.
Section 10 amends s. 607.0503, F.S., to redesignate certain subsections and create a mechanism
for a registered agent of more than one dissolved corporation that has been dissolved for 10
years or longer, through a single composite statement. Additionally, the bill sets forth
requirements that the composite resignation statement should contain the name of each dissolved
corporation and the date of the respective corporation’s dissolution. The resignation statement, or
composite resignation statement, if resigning from two or more corporations at a time, once filed
with the DOS, must also be delivered to the corporation or each respective corporations’ current
mailing address as it appears in the records of the DOS.
Section 11 amends s. 617.0502, F.S., to redesignate certain subsections and create a mechanism
for a registered agent of more than one dissolved (not for profit) corporation that has been
dissolved for 10 years or longer, through a single composite statement. Additionally, the bill sets
forth requirements that the composite resignation statement should contain the name of each
dissolved corporation and the date of the respective corporations’ dissolution. The resignation
statement, or composite resignation statement, if resigning from two or more corporations at a
time, once filed with the DOS, must also be delivered to the corporation or each respective
corporation’s current mailing address as it appears in the records of the DOS.
Fees
Section 12 amends s. 605.0213, F.S., to provide that the fee to resign as a registered agent of a
dissolved limited liability company is the same, regardless of whether one is resigning from one
entity or more than one entity.
Section 13 amends s. 607.0122, F.S., to provide that the fee to resign as a registered agent of an
dissolved corporation is the same, regardless of whether one is resigning from one corporation or
more than one corporation.
Section 14 amends s. 617.0122, F.S., to provide that the fee to resign as a registered agent of an
inactive corporation is the same, regardless of whether one is resigning from one corporation or
more than one corporation.
BILL: CS/SB 1198 Page 10
Incorporating Amendments
Sections 15 through 26 make conforming changes.
Effective Date
Section 27 provides an effective date of July 1, 2024.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
None.
B. Public Records/Open Meetings Issues:
None.
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
None.
E. Other Constitutional Issues:
None.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
Registered agents looking to resign from more than one inactive corporation at a time
will see a reduction in their charged fees.
B. Private Sector Impact:
None.
C. Government Sector Impact:
Indeterminate at this time.
The DOS is likely to see a reduced amount in collected fees if a registered agent is able to
resign from more than one corporation at a time paying only one fee, as opposed to
current law that makes a registered agent pay to resign from each corporation separately. BILL: CS/SB 1198 Page 11
VI. Technical Deficiencies:
None.
VII. Related Issues:
Fees
The bill creates a new filing requirement, the filing of articles of validation. Section 7 of the bill
states that “a corporation that ratifies a defective corporate action and that corporate action that
was ratified would have required a filing under ss. 607.0145-607.0152, F.S., must file articles of
validation.” Typically filings have fees associated with them, however this bill does not
contemplate any fee for filing articles of validation.
VIII. Statutes Affected:
This bill substantially amends the following sections of the Florida Statutes:, 605.0115,
607.0503, 617.0502, 605.0213, 607.0122, 617.0122, 605.0207, 605.0113, 658.23, 607.0501,
607.193, 607.0120, 607.1507, 39.8298, 252.71, 288.012, 617.1807, 617.2006, 617.0501, and
617.0503.
The bill creates sections 607.0145, 607.0146, 607.0147, 607.0148, 607.0149, 607.0150,
607.0151, and 607.0152 of the Florida Statutes.
IX. Additional Information:
A. Committee Substitute – Statement of Substantial Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
CS by Commerce and Tourism on January 23, 2024:
The committee substitute primarily makes clarifying and stylistic changes throughout the
bill. The most significant adjustments to the bill are as follows:
The amendment adds clarifying language to the definition of “validation effective
time” stating that the filing or pendency of a judicial proceeding will not affect the
validation effective time.
The amendment clarifies when the issuance of putative shares become effective.
The amendment clarifies what actions a circuit court can take regarding challenges to
the validity of defective corporate actions.
The amendment adjusts the language to clarify which types of business entities a
registered agent can resign from using a composite statement to resign from more
than one business entity at a time.
The amendment clarifies language associated with the fees.
Additionally, the amendment deletes language regarding a registered agent being able to
resign from one or more foreign corporations or partnerships at a time with a single
composite statement and fee. BILL: CS/SB 1198 Page 12
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.