(Graphic by Marcus Winkler via Pexels)
By Michael Kuczynski, Jonathan Grissom, Maverick Flowers and Lisa Schultes
A sweeping modernization of Florida’s state law regarding nonprofits took effect this past July 1. The legislation materially affects nonprofit governance, member rights and procedures, officer standards of conduct, and the statutory framework governing mergers, restructurings and other fundamental transactions.
Although many organizations might not require immediate structural changes, most Florida nonprofit corporations should anticipate the need to review and potentially revise their articles of incorporation, bylaws, governance policies, member procedures and transaction documentation to ensure alignment with revised statutory defaults and newly available statutory mechanisms.
The updates apply not only to charitable nonprofits, but also to member-driven organizations, including trade associations, professional organizations and community associations organized under Chapter 617 of the Florida Nonprofit Act. The rewrite draws the American Bar Association’s Model Nonprofit Corporation Act and harmonizes with Chapter 617 with Florida’s Business Corporation Act.
Florida’s charitable solicitation requirements are governed primarily by Chapter 496, Florida Statutes, the Solicitation of Contributions Act, not the Florida Nonprofit Act. HB 797 did not change Florida’s charitable solicitation registration requirements or otherwise directly regulate fundraising activities such as direct mail, email, online campaigns or similar communications.
As a result, most of HB 797’s changes should not apply to a non-Florida nonprofit that is only soliciting charitable contributions in Florida and is not otherwise conducting affairs in Florida in a manner that requires authority under the Florida Nonprofit Act.
For foreign nonprofit corporations that are authorized to conduct affairs in Florida, or that conduct affairs in Florida without authority, the amendments to Chapter 617 are generally limited to corporate governance and administrative matters, including notice procedures, registered agent and registered office requirements, service-of-process provisions, withdrawal from Florida, domestication or redomiciliation to Florida, and the grounds and procedures for revocation and reinstatement of a certificate of authority to transact business in the state.
Here are a few key take-aways:
* The new law is now effective and comprehensively modernizes the Florida Nonprofit Act;
* The legislation reshapes nonprofit governance, member rights and restructuring mechanics to align with the ABA’s Model Nonprofit Corporation Act; and,
* Florida nonprofits should conduct a focused governance review to align governing documents, policies and practices with the revised statutory defaults now in effect.
What Changed And Why It Matters
The new law is a comprehensive revision. The law materially affects nonprofit governance, member rights and procedures, officer standards of conduct, and the statutory framework governing mergers, restructurings and other fundamental transactions.
Although many organizations might not require immediate structural changes, leaders at most Florida nonprofit corporations should anticipate the need to review and potentially revise their organizations’articles of incorporation, bylaws, governance policies, member procedures and transaction documentation to ensure alignment with revised statutory defaults and newly available statutory mechanisms.
These updates apply not only to charitable nonprofits, but also to member-driven organizations, including trade associations, professional organizations and community associations organized.
Key Changes At A Glance
There’s a new statutory framework for derivative proceedings. The new law The new provisions address standing requirements, demand and demand-excuse pleading standards, potential stays while the corporation investigates, and dismissal mechanisms where qualified decisionmakers determine that continuation of the action is not in the corporation’s best interests.
Settlements and discontinuances generally require court approval, and courts may direct notice to members in appropriate cases. These provisions intersect with the statute’s newly defined “qualified director” concept.
The practical impact is that leaders should evaluate current and anticipated litigation matters in light of these procedural requirements.
The law has been substantially revised to clarify what constitutes a director conflict-of-interest transaction and to define the standards by which fairness to the corporation is assessed.
This new section introduces the concept of a “qualified director,” which applies in multiple statutory contexts, including approval of conflict-of-interest transactions, determinations regarding derivative proceedings and certain indemnification decisions. A qualified director must not have a material interest or relationship in the relevant transaction or proceeding.
These provisions establish clearer statutory guardrails governing interested-director transactions and are intended to mitigate risks associated with private benefit or excess benefit transactions.
The practical impact is that leaders should review and update conflict-of-interest policies, board approval procedures and bylaws to incorporate the qualified director framework and ensure compliance with statutory safeguards.
The law updates default rules concerning board and member governance, including director participation via communications technology, waivers of notice, action by unanimous written consent, remote member participation and recordkeeping requirements for remote votes. The legislation also revises provisions governing director elections, terms, removal and vacancies.
The practical impact is that practical impact is that nonprofit leaders should review bylaws, meeting procedures and electronic communications practices to ensure consistency with the revised statute. Particular attention should be given to notice requirements for annual and special meetings and to procedures governing remote participation and electronic voting.
Florida nonprofit corporations historically were generally prohibited from transferring or selling membership interests, unless transfer rights were authorized under the statute and the corporation’s governing documents. The new law retains a general default rule that, unless otherwise provided in the articles of incorporation or bylaws, a member may not transfer a membership or any right arising from membership except as otherwise permitted by statute.
For mutual benefit corporations, Florida law has included, and HB 797 continues to include, specific rules addressing when membership interests or rights arising from membership may be transferred and when later-adopted restrictions bind existing members.
The new law aligns Florida law more closely with the Model Act approach by clarifying the transferability framework for membership interests and rights arising from membership and by separately addressing when a corporation may purchase membership interests.
Importantly, the purchase rules distinguish between Section 501(c)(3) organizations and other nonprofit corporations. Section 501(c)(3) organizations may not purchase membership interests or rights arising from membership, while other nonprofit corporations may do so to the extent authorized in their articles of incorporation or bylaws and subject to statutory limitations. The law also includes a mutual benefit corporation-specific rule permitting the purchase of the membership interest of a member who resigns or whose membership is terminated, if authorized in the governing documents and statutory solvency requirements are satisfied.
The practical impact is that it clarifies the statutory framework for nonprofit membership transfers and purchases. Organizations where leaders wish to permit transferability should consider amending their organizing documents accordingly, which may simplify future merger and acquisition transactions, or other transactions involving membership interests. Public benefit and charitable organizations, particularly Section 501(c)(3) organizations, should separately evaluate these provisions because the purchase of membership interests remains restricted or prohibited in important respects.
The legislation revises and expands statutory provisions governing mergers and similar transactions. Among other changes, the law introduces a short-form parent-subsidiary merger provision, adds conversion and domestication mechanisms and substantially updates the required contents of articles of merger.
The statute addresses property held for charitable purposes and imposes additional limits on transactions involving that property, including limitations designed to ensure that charitable-purpose property remains dedicated to charitable purposes following a merger or similar transaction. It also includes provisions concerning “protected agreements,” which may treat certain conversions or domestications as mergers unless relevant contractual language is amended after July 1, 2026. Additional procedural requirements govern approval of a plan of merger, including circumstances in which directors must provide notice rather than a recommendation due to conflicts.
The practical impact is that leaders considering mergers or reorganizations should carefully evaluate these revised requirements to ensure compliance and mitigate liability exposure.
The law creates and revises statutory provisions governing domestications and conversions involving nonprofit corporations, including required plan contents and approval procedures.
The practical impact is that for many of the businesses and individuals moving to Florida, redomiciling their affiliated charitable organizations may be appealing. The law provides a clearer path for how to achieve that result. Additionally, the law provides clarity for entities that may want to convert to a nonprofit corporation.
Under the previous language of the law, distributions, which included dividends, were generally restricted unless specific exceptions were met, including mutual benefits, the payment of reasonable compensation, transfers upon dissolution or upon partial liquidation. Although distributions remain generally restricted, the law introduces a new exception permitting distributions to another nonprofit entity or governmental unit that is a member of the distributing corporation or that has authority to appoint one or more directors.
The practical impact of this change is that it might simplify planning within complex structures or joint ventures where that entity is organized as a nonprofit corporation. Previously, members might have had to rely upon management service agreements or other similar arrangements to receive money from a nonprofit corporation of which they were members. The law simplifies that process and may streamline investment by a nonprofit organization into other nonprofit organizations.
Organizational leaders should still evaluate any proposed transfer carefully in light of charitable asset restrictions, private benefit concerns and applicable tax-exemption requirements.
The law revises statutory provisions relating to dissolution and judicial proceedings. Courts are granted additional equitable remedies short of dissolution. Examples of these alternatives include the appointment of a receiver or custodian, appointment of a provisional director, or other equitable relief. A provisional director may be appointed to help address governance deadlock, alleged misconduct or other issues raised by members or directors.
The practical impact of these expanded remedies provides members and directors with additional mechanisms to address governance disputes or alleged misconduct without necessarily dissolving the corporation.
The law codifies a standard of conduct for officers, requiring them to act in good faith, in a manner they reasonably believe to be in the best interests of the corporation and with the care an ordinarily prudent person in a like position would exercise under similar circumstances.
The law also identifies categories of persons upon whom an officer may reasonably rely, including informed employees, legal counsel, accountants and other professionals.
The practical impact is that organizational leaders should incorporate this statutory standard into their bylaws and governance policies and ensure that officer roles and responsibilities are clearly documented.
The statutory process for amending articles of incorporation has been comprehensively revised. Directors must first adopt a proposed amendment and, unless otherwise authorized by statute, submit it to the organization’s members for approval, along with a recommendation to approve the articles of amendment, unless a conflict of interest or other special circumstance prevents such recommendation. The statute also identifies certain amendments that may be approved by the board without member approval.
This section provides a default for the amendment process if one is not provided in the organizing documents. Leaders should review their organizing documents to confirm that amendment procedures remain consistent with governance objectives and statutory requirements.
Who Should Pay Attention
These changes might impact any organization incorporated under the Florida Nonprofit Act, including:
- Charitable nonprofits and grantmaking entities organized as Florida nonprofits;
- Trade and professional associations; and,
- Member-driven nonprofits, including many community association structures that use the Florida Nonprofit Act for governance defaults
Florida’s charitable solicitation requirements are governed primarily by Chapter 496, Florida Statutes, the Solicitation of Contributions Act, not the Florida Nonprofit Act. HB 797 did not change Florida’s charitable solicitation registration requirements or otherwise directly regulate fundraising activities such as direct mail, email, online campaigns or similar communications.
As a result, most of HB 797’s changes should not apply to a non-Florida nonprofit that is only soliciting charitable contributions in Florida and is not otherwise conducting affairs in Florida in a manner that requires authority under the Florida Nonprofit Act.
For foreign nonprofit corporations that are authorized to conduct affairs in Florida, or that conduct affairs in Florida without authority, the amendments to Chapter 617 are generally limited to corporate governance and administrative matters, including notice procedures, registered agent and registered office requirements, service-of-process provisions, withdrawal from Florida, domestication or redomiciliation to Florida, and the grounds and procedures for revocation and reinstatement of a certificate of authority to transact business in the state.
Next Steps Now That the Law Is Effective
If your organization is governed by the Florida Nonprofit Act, consider a focused governance review to confirm compliance with the revised statute:
- Governing documents checkup: Identify where articles and bylaws rely on statutory defaults that have changed, especially concerning member governance, meeting mechanics and officer provisions.
- Board and officer practice review: Confirm the delegations, committee authority and officer responsibilities reflect current practice and are properly documented.
- Policy review: Review your corporate policies and procedures to ensure they are compliant with the revised law and aligned with your organization’s current realities.
- Membership governance review (if applicable): Validate quorum, voting standards, proxy and remote voting rules (if used), member notices and discipline or termination provisions.
- Transaction planning (if applicable): For mergers and restructurings, conduct an inventory of the assets potentially held for charitable purposes and evaluate structural constraints early.
- Implementation plan: Decide what should be amended to conform to the revised statute versus what can be addressed through policy and process updates.
*****
Michael Kuczynski is of counsel at the law firm Polsinelli. His email is mkuczynski@polsinelli.com. Lisa Schultes is senior partner and chair of the Nonprofit Organizations Practice at Polsinelli. Her email is lschultes@polsinelli.com. Jonathan Grissom is a principal at Polsinelli. His email is jgrissom@polsinelli.com. Maverick Flowers is an associate at the firm. His email is mflowers@polsinelli.com
