By: Douglas L. Waldorf, Jr.
One of the threshold issues to consider in loan transactions is determining who is authorized to sign the loan documents on behalf of entity borrowers. This is important not only in cases where the entity is the borrower but also where the entity will serve as a guarantor of other debt. Recently, the Florida Legislature enacted the Florida Revised Limited Liability Company Act that impacts this issue as it applies to limited liability companies.
Under the new Florida Statute 605, we no longer have the “managing member” concept. Rather, an LLC is deemed to be member-managed unless the articles of organization or the operating agreement expressly provide the other management alternative: manager-managed. If the operating agreement does not address this issue, the statute provides the default option that the LLC will be member-managed.
In a manager-managed LLC, the manager will generally be the authorized signor of loan documents. Likewise, a member will generally be the authorized signor for member-managed LLCs. However, it is imperative that the operating agreement be reviewed as it can override certain statutory provisions and will be deemed to govern. A well drafted operating agreement will specifically address the procedure for the entity to borrow money and pledge collateral or to serve as a guarantor for other debt and it may, in fact, require that more than one signor is needed or that a vote of the members is required to authorize the act. If there is no operating agreement, the all of the members should be required to consent to the transaction. In mortgage loan transactions, the lender should also review the public records of the county in which the real property is located to make sure there is no statement of authority recorded which limits the manager or member’s authority to mortgage real property.