On July 1, 2026, Florida’s CS/CS/HB 797 takes effect, enacting a comprehensive modernization of Chapter 617, Florida Statutes—the law governing not-for-profit corporations in Florida. The bill introduces significant changes to governance, liability, membership rights, mergers, conversions, and enforcement across the nonprofit sector. Below is a summary of the key areas affected.
Key Provisions
1. Derivative Proceedings – The bill establishes standing requirements, procedural safeguards, and standards for court oversight.
- A director, officer, or member may not commence a derivative proceeding unless that person held the position when the conduct giving rise to the action occurred or acquired the position through transfer or operation of law from someone who did.
- The court may dismiss a derivative proceeding on motion by the corporation if a majority of qualified directors determine that maintaining the proceeding is not in the best interests of the corporation.
- A derivative action may not be discontinued or settled without court approval, and the court may direct notice to affected members.
2. Conflict of Interest and Qualified Director – The bill defines key terms—including “director’s conflict-of-interest transaction,” “fair to the corporation,” “material financial interest,” and “family member," and establishes a clear procedural structure for authorizing interested transactions.
- If a director’s conflict-of-interest transaction is fair to the corporation at the time it is authorized, approved, or ratified, the transaction is not void or voidable and is not grounds for relief or sanctions.
- New term defined: "qualified director"- a director without a material interest in the outcome of a proceeding or transaction, and who does not have a material relationship with a person who has such an interest. A director is not automatically disqualified from being a “qualified director” merely because the director was nominated by a non-qualified director or serves on another board with a non-qualified director.
3. Board and Member Mechanics
- Members may hold meetings in or out of state; annual, regular, and special meetings are governed by the articles or bylaws, and failure to hold an annual meeting does not cause forfeiture or dissolution.
- Action may be taken without a meeting if evidenced by written consent signed by members holding the minimum votes necessary to authorize the action at a meeting.
4. Transfer or Purchase of Membership
- Except as provided in the articles of incorporation or bylaws, a member may not transfer a membership or any right arising from membership. Where the right to transfer has been provided, a restriction on that right is not binding on a member holding a membership issued before the adoption of the restriction unless the affected member approves.
- A corporation described in Section 501(c)(3) may not purchase the membership interests of any of its members, but any other corporation may purchase membership interests to the extent provided in its governing documents—and no such payment is deemed a dividend. A corporation may also purchase the membership interest of a member who resigns or is terminated, subject to a solvency test.
5. Mergers
- The bill substantially rewrites the merger provisions, permitting one or more domestic not-for-profit corporations to merge with other domestic or foreign eligible entities pursuant to a plan of merger.
- A domestic corporation holding property for a charitable purpose may merge only if the surviving entity is organized as a nonprofit.
- The plan of merger must first be adopted by the board of directors and, if members are entitled to vote, approved by those members at a meeting at which a quorum exists; if no members vote, the plan may be adopted by a majority of directors then in office. A plan of merger may be abandoned after approval but before the articles of merger become effective.
6. Conversions and Domestications – HB 797 creates entirely new statutory provisions for entity conversions and domestications.
- A domestic not-for-profit corporation may convert to a domestic or foreign eligible entity (such as an LLC) by approving a plan of conversion, and a domestic or foreign eligible entity may convert to a domestic not-for-profit corporation.
- A domestic corporation may redomicile to a foreign jurisdiction, and a foreign corporation may domesticate into Florida, through a plan of domestication that must be adopted by the board of directors and, if applicable, approved by the members.
- A domestic corporation holding property for a charitable purpose is prohibited from converting to another entity type, except by domestication to become a foreign corporation.
7. Distributions and Dividends – The bill reinforces the general prohibition on distributions: a not-for-profit corporation may not pay any dividend or distribute any part of its net income or net earnings to its members, directors, or officers.
- However, a corporation may pay reasonable compensation for services rendered, confer benefits upon members in conformity with its purposes, and make distributions to members upon dissolution or partial liquidation if expressly permitted by the articles of incorporation.
- None of these permissible payments, benefits, or distributions may be deemed a dividend or distribution of income or earnings.
- Distributions may also be made to another nonprofit entity or governmental unit that is a member of the distributing corporation or that has the power to appoint one or more of its directors.
8. Dissolution and Judicial Remedies – The bill modernizes dissolution provisions and creates new protections for directors of dissolved corporations from personal liability to claimants, provided certain statutory claim-disposition procedures under new Sections 617.1407, 617.1408, or 617.1409 have been followed.
- A court may order judicial dissolution on petition of at least 50 members or members holding at least 10 percent of the voting power, based on grounds including director deadlock, waste of corporate assets, illegal conduct, or inability to assemble a quorum.
- The bill also creates a new provisional director remedy, allowing the court to appoint a provisional director with all the rights and powers of a duly elected director to address deadlock or other grounds for dissolution.
- If a proceeding is commenced arbitrarily or in bad faith, the court may award reasonable attorney fees and costs to the adversely affected parties.
9. Standards of Conduct
- New Section 617.0830 specifies that each director, when discharging duties, must act in good faith and in a manner the director reasonably believes is in the best interests of the corporation and must exercise the care an ordinarily prudent person in a like position would find appropriate.
- Directors are entitled to rely on officers, employees, legal counsel, accountants, and board committees they reasonably believe to be competent and reliable.
- New Section 617.0844 establishes parallel standards for officers, requiring them to act in good faith, exercise appropriate care, and report material information—including known or probable violations of law—to superiors or the board.
- Neither a director nor an officer is deemed a trustee with respect to the corporation or property held by it.
10. Amending Articles of Incorporation
- A corporation may amend its articles of incorporation at any time to add, change, or delete provisions, as determined permissible as of the effective date of the amendment.
- If members are entitled to vote on a proposed amendment, the amendment must first be adopted by the board of directors and then approved by the members; the board must recommend approval unless conflicts of interest or other special circumstances warrant proceeding without a recommendation. If no members are entitled to vote, the amendment may be adopted by a majority of directors then in office. Additionally, the board may adopt certain non-substantive amendments (such as deleting names of initial directors or changing a geographic attribution in the corporate name) without member approval.
Key Takeaways and Next Steps
HB 797 represents the most significant overhaul of Florida’s nonprofit corporation law in decades. If you are a member, director, or officer of a Florida not-for-profit corporation, you should be aware that the new law takes effect on July 1, 2026, and may require updates to your organization’s articles of incorporation and bylaws to ensure conformity with the revised statutory framework. Organizations should evaluate their operational readiness for these new requirements. Please reach out to Benjamin Hanan, Christa Sullivan, David Heedy, or Jaclyn Foster if you have questions about Florida HB 797 and its impact on your organization.