SB1495 EngrossedLRB101 08080 JLS 53143 b

1    AN ACT concerning business.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Limited Liability Company Act is amended by
5changing Sections 1-5, 1-40, 10-1, 10-10, 10-15, 13-15, 15-20,
630-1, 35-1, and 35-45 as follows:
 
7    (805 ILCS 180/1-5)
8    Sec. 1-5. Definitions. As used in this Act, unless the
9context otherwise requires:
10    "Anniversary" means that day every year exactly one or more
11years after: (i) the date the articles of organization filed
12under Section 5-5 of this Act were filed by the Office of the
13Secretary of State, in the case of a limited liability company;
14or (ii) the date the application for admission to transact
15business filed under Section 45-5 of this Act was filed by the
16Office of the Secretary of State, in the case of a foreign
17limited liability company.
18    "Anniversary month" means the month in which the
19anniversary of the limited liability company occurs.
20    "Articles of organization" means the articles of
21organization filed by the Secretary of State for the purpose of
22forming a limited liability company as specified in Article 5
23and all amendments thereto, whether evidenced by articles of

 

 

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1amendment, articles of merger, or a statement of correction
2affecting the articles.
3    "Assumed limited liability company name" means any limited
4liability company name other than the true limited liability
5company name, except that the identification by a limited
6liability company of its business with a trademark or service
7mark of which it is the owner or licensed user shall not
8constitute the use of an assumed name under this Act.
9    "Bankruptcy" means bankruptcy under the Federal Bankruptcy
10Code of 1978, Title 11, Chapter 7 of the United States Code, as
11amended from time to time, or any successor statute.
12    "Business" includes every trade, occupation, profession,
13and other lawful purpose, whether or not carried on for profit.
14    "Company" means a limited liability company.
15    "Contribution" means any cash, property, services
16rendered, or other benefit, or a promissory note or other
17binding obligation to contribute cash or property, perform
18services, or provide any other benefit, that a person
19contributes to the limited liability company in that person's
20capacity as a member or in order to become a member.
21    "Court" includes every court and judge having jurisdiction
22in a case.
23    "Debtor in bankruptcy" means a person who is the subject of
24an order for relief under Title 11 of the United States Code, a
25comparable order under a successor statute of general
26application, or a comparable order under federal, state, or

 

 

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1foreign law governing insolvency.
2    "Distribution" means a transfer of money, property, or
3other benefit from a limited liability company to a member in
4the member's capacity as a member or to a transferee of the
5member's distributional interest.
6    "Distributional interest" means a member's right to
7receive distributions of the limited liability company's
8assets, but no other rights or interests of a member.
9    "Entity" means a person other than an individual.
10    "Federal employer identification number" means either (i)
11the federal employer identification number assigned by the
12Internal Revenue Service to the limited liability company or
13foreign limited liability company or (ii) in the case of a
14limited liability company or foreign limited liability company
15not required to have a federal employer identification number,
16any other number that may be assigned by the Internal Revenue
17Service for purposes of identification.
18    "Foreign limited liability company" means an
19unincorporated entity organized under laws other than the laws
20of this State that afford limited liability to its owners
21comparable to the liability under Section 10-10 and is not
22required to register to transact business under any law of this
23State other than this Act.
24    "Insolvent" means that a limited liability company is
25unable to pay its debts as they become due in the usual course
26of its business.

 

 

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1    "Legal representative" means, without limitation, an
2executor, administrator, guardian, personal representative and
3agent, including an appointee under a power of attorney.
4    "Limited liability company" means a limited liability
5company organized under this Act.
6    "L3C" or "low-profit limited liability company" means a
7for-profit limited liability company which satisfies the
8requirements of Section 1-26 of this Act and does not have as a
9significant purpose the production of income or the
10appreciation of property.
11    "Manager" means a person, whether or not a member of a
12manager-managed company, who is vested with authority in an
13operating agreement as provided in Section 15-1.
14    "Manager-managed company" means a limited liability
15company that vests authority in a manager or managers in an
16operating agreement as provided in Section 15-1.
17    "Member" means a person who becomes a member of the limited
18liability company upon formation of the company or in the
19manner and at the time provided in the operating agreement or,
20if the operating agreement does not so provide, in the manner
21and at the time provided in this Act.
22    "Member-managed company" means a limited liability company
23other than a manager-managed company.
24    "Membership interest" means all of a member's rights in the
25limited liability company, including the member's right to
26receive distributions of the limited liability company's

 

 

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1assets.
2    "Operating agreement" means the agreement under Section
315-5, whether or not referred to as an operating agreement and
4whether oral, in a record, implied, or in any combination
5thereof, of all of the members of a limited liability company,
6including a sole member, concerning the relations among the
7members, managers, and limited liability company. The term
8"operating agreement" includes amendments to the agreement.
9    "Organizer" means one of the signers of the original
10articles of organization.
11    "Person" means an individual, partnership, domestic or
12foreign limited partnership, limited liability company or
13foreign limited liability company, trust, estate, association,
14corporation, governmental body, or other juridical being.
15    "Professional limited liability company" means a limited
16liability company that provides professional services licensed
17by the Department of Financial and Professional Regulation and
18that is organized under the Professional Limited Liability
19Company Act and this Act.
20    "Record" means information that is inscribed on a tangible
21medium or that is stored in an electronic or other medium and
22is retrievable in perceivable form.
23    "Registered office" means that office maintained by the
24limited liability company in this State, the address, including
25street, number, city and county, of which is on file in the
26office of the Secretary of State, at which, any process,

 

 

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1notice, or demand required or permitted by law may be served
2upon the registered agent of the limited liability company.
3    "Registered agent" means a person who is an agent for
4service of process on the limited liability company who is
5appointed by the limited liability company and whose address is
6the registered office of the limited liability company.
7    "Restated articles of organization" means the articles of
8organization restated as provided in Section 5-30.
9    "Sign" means, with the present intent to authenticate or
10adopt a record:
11        (1) to execute or adopt a tangible symbol; or
12        (2) to attach to or logically associate with the record
13    an electronic symbol, sound, or process.
14    "State" means a state, territory, or possession of the
15United States, the District of Columbia, or the Commonwealth of
16Puerto Rico.
17    "Transfer" includes an assignment, conveyance, deed, bill
18of sale, lease, mortgage, security interest, encumbrance, and
19gift.
20(Source: P.A. 99-637, eff. 7-1-17; 100-894, eff. 8-14-18.)
 
21    (805 ILCS 180/1-40)
22    Sec. 1-40. Records to be kept.
23    (a) Each limited liability company shall keep at the
24principal place of business of the company named in the
25articles of organization or other reasonable locations

 

 

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1specified in the operating agreement all of the following:
2        (1) A list of the full name and last known address of
3    each member setting forth the amount of cash each member
4    has contributed, a description and statement of the agreed
5    value of the other property or services each member has
6    contributed or has agreed to contribute in the future, and
7    the date on which each became a member.
8        (2) A copy of the articles of organization, as amended
9    or restated, together with executed copies of any powers of
10    attorney under which any articles, application, or
11    certificate has been executed.
12        (3) Copies of the limited liability company's federal,
13    State, and local income tax returns and reports, if any,
14    for the 3 most recent years.
15        (4) Copies of any then effective written operating
16    agreement and any amendments thereto and of any financial
17    statements of the limited liability company for the 3 most
18    recent years.
19    (b) Records kept under this Section may be inspected and
20copied at the request and expense of any member or legal
21representative of a deceased member or member under legal
22disability during ordinary business hours.
23    (c) The rights under subsection (b) of this Section also
24extend to a transferee of a distributional interest, but only
25for a proper purpose. In order to exercise this right, a
26transferee must make written demand upon the limited liability

 

 

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1company, stating with particularity the records sought to be
2inspected and the purpose of the demand.
3    (d) Within 10 days after receiving a demand pursuant to
4subsection (c):
5        (1) the company shall provide the information demanded
6    or, in a record, a description of the information the
7    company will provide, stating a reasonable time within
8    which it will be provided and the place where it will be
9    provided; and
10        (2) if the company declines to provide any demanded
11    information, the company shall state its reasons for
12    declining to the transferee in a record.
13    A transferee may exercise the rights under this subsection
14through a legal representative.
15    (e) If the company fails to comply with this Section, the
16person making a request or demand may file an action to compel
17the company to permit the inspection and copying and to obtain
18such other legal or equitable relief as may be proper. If the
19court finds that the company failed to comply with the
20requirements of this Section and, in the case of subsection (c)
21or (d), the company acted unreasonably, the court may award the
22plaintiff its reasonable costs and attorney's fees incurred in
23bringing and prosecuting the action.
24(Source: P.A. 99-637, eff. 7-1-17.)
 
25    (805 ILCS 180/10-1)

 

 

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1    Sec. 10-1. Admission of members.
2    (a) A person becomes a member of a limited liability
3company:
4        (1) upon formation of the company, as provided in an
5    agreement between the organizer and the initial member if
6    there is only one member, or as provided in an agreement
7    among initial members if there is more than one member;
8        (2) after the formation of the company,
9            (A) as provided in the operating agreement;
10            (B) as the result of a transaction effective under
11        Article 37;
12            (C) with the consent of all the members; or
13            (D) if, within 180 consecutive days after the
14        company ceases to have any members:
15                (i) the last person to have been a member, or
16            the legal representative of that person,
17            designates a person to become a member; and
18                (ii) the designated person consents to become
19            a member.
20            More than one person may be designated to become a
21        member under this clause (D).
22    (b) A person that acquires a distributional interest, but
23that does not become a member, has merely the rights of a
24transferee under Sections 30-5 and 30-10.
25    (c) A person may become a member without acquiring a
26distributional interest and without making or being obligated

 

 

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1to make a contribution to the limited liability company.
2(Source: P.A. 99-637, eff. 7-1-17.)
 
3    (805 ILCS 180/10-10)
4    Sec. 10-10. Liability of members and managers.
5    (a) Except as otherwise provided in subsection (d) of this
6Section, the debts, obligations, and liabilities of a limited
7liability company, whether arising in contract, tort, or
8otherwise, are solely the debts, obligations, and liabilities
9of the company. A member or manager is not personally liable
10for a debt, obligation, or liability of the company solely by
11reason of being or acting as a member or manager.
12    (a-5) Nothing in subsection (a) or subsection (d) limits
13the personal liability of a member or manager imposed under law
14other than this Act, including, but not limited to, agency,
15contract, and tort law. The purpose of this subsection (a-5) is
16to overrule Dass v. Yale, 2013 IL App (1st) 122520, and similar
17decisions and clarify that under existing law a member or
18manager of a limited liability company may be liable under law
19other than this Act for its own wrongful acts or omissions,
20even when acting or purporting to act on behalf of a limited
21liability company. This subsection is therefore intended to be
22applicable to actions with respect to which all timely appeals
23have not exhausted before the effective date of this amendatory
24Act of the 101st General Assembly as well as to all actions
25commenced on or after the effective date of this amendatory Act

 

 

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1of the 101st General Assembly.
2    (b) (Blank).
3    (c) The failure of a limited liability company to observe
4the usual company formalities or requirements relating to the
5exercise of its company powers or management of its business is
6not a ground for imposing personal liability on the members or
7managers for liabilities of the company.
8    (d) All or specified members of a limited liability company
9are liable in their capacity as members for all or specified
10debts, obligations, or liabilities of the company if:
11        (1) a provision to that effect is contained in the
12    articles of organization; and
13        (2) a member so liable has consented in writing to the
14    adoption of the provision or to be bound by the provision.
15(Source: P.A. 90-424, eff. 1-1-98.)
 
16    (805 ILCS 180/10-15)
17    Sec. 10-15. Right of members and dissociated members to
18information.
19    (a) A company shall furnish information when any member
20demands it in a record concerning the company's activities,
21financial condition, and other circumstances of the company's
22business necessary to the proper exercise of a member's rights
23and duties under the operating agreement or this Act or that is
24otherwise material to the member's membership interest in the
25company of a member, unless the company knows that the member

 

 

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1already knows that information.
2    (b) The following rules apply when a member makes a demand
3for information under this Section:
4        (1) During regular business hours and at a reasonable
5    location and time specified by the company, a member may
6    obtain from the company, inspect, and copy information for
7    a purpose consistent with subsection (a).
8        (2) Within 10 days after receiving a demand pursuant to
9    subsection (a):
10            (A) the company shall provide the information
11        demanded or, in a record, a description of the
12        information the company will provide, stating a
13        reasonable time within which it will be provided and
14        the place where it will be provided; and
15            (B) if the company declines to provide any demanded
16        information, the company shall state its reasons for
17        declining to the member in a record.
18    (c) Whenever this Act or an operating agreement provides
19for a member to give or withhold consent to a matter, before
20the consent is given or withheld, the company shall, without
21demand, provide the member with all information that is known
22to the company that is material to the member's decision.
23    (d) Within 10 days after a demand made in a record received
24by the limited liability company, a dissociated member may have
25access to information to which the person was entitled while a
26member if the information pertains to the period during which

 

 

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1the person was a member, and the person seeks the information
2in good faith for a purpose consistent with subsection (a). The
3company shall respond to a demand made pursuant to this
4subsection in the manner provided in subdivisions (A) and (B)
5of paragraph (2) of subsection (b).
6    (e) A limited liability company may charge a person that
7makes a demand under this Section the reasonable costs of
8copying, limited to the costs of labor and material.
9    (f) A member or dissociated member may exercise rights
10under this Section through an agent or, in the case of an
11individual under legal disability, a legal representative. Any
12restriction or condition imposed by the operating agreement or
13under subsection (h) applies both to the agent or legal
14representative and the member or dissociated member.
15    (g) The rights under this Section do not extend to a person
16as transferee.
17    (h) In addition to any restriction or condition stated in
18its operating agreement, the limited liability company, as a
19matter within the ordinary course of its activities, may impose
20reasonable restrictions and conditions on access to and use of
21information to be furnished under this Section including, but
22not limited to, the designation of information such as trade
23secrets or information subject to confidentiality agreements
24with third parties as confidential with appropriate
25nondisclosure and safeguarding obligations. In a dispute
26concerning the reasonableness of a restriction or designation

 

 

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1under this subsection, the company has the burden of proving
2reasonableness.
3    (i) This Section does not limit or restrict the right to
4inspect and copy records as provided in subsection (b) of
5Section 1-40.
6    (j) If the company fails to provide any information
7required to be provided by this Section, the person entitled to
8the information may file an action to compel the company to
9provide the information and to obtain such other legal or
10equitable relief as may be proper. If the court finds that the
11company failed to comply with the requirements of this Section,
12the court may award the plaintiff its reasonable costs and
13attorney's fees incurred in bringing and prosecuting the
14action. The court may, in connection with any information
15described in subsection (h), impose such restrictions and
16conditions on access to and use of such information as it deems
17appropriate based on the reasonable needs of the company and
18the member in question.
19(Source: P.A. 99-637, eff. 7-1-17.)
 
20    (805 ILCS 180/13-15)
21    Sec. 13-15. Statement of authority.
22    (a) A limited liability company may deliver to the
23Secretary of State for filing a statement of authority. The
24statement shall be executed and filed in accordance with
25Section 5-45 of this Act and:

 

 

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1        (1) must include the name of the company and the
2    address of its principal place of business; and
3        (2) may state the authority, or limitations on the
4    authority, of any member or manager of the company or any
5    other person to:
6            (A) execute an instrument transferring real
7        property held in the name of the company; or
8            (B) enter into other transactions on behalf of, or
9        otherwise act for or bind, the company.
10    (b) To amend or cancel a statement of authority, a limited
11liability company must deliver to the Secretary of State for
12filing a statement of amendment or cancellation. The statement
13must include shall be executed and filed in accordance with
14Section 5-45 of this Act and:
15        (1) the name of the limited liability company and the
16    address of its principal place of business;
17        (2) the date the statement of authority being amended
18    or cancelled became effective; and
19        (3) the contents of the amendment or a declaration that
20    the statement of authority is canceled.
21    (c) Except as otherwise provided in subsections (e) and
22(f), a limitation on the authority of a member or manager of
23the limited liability company contained in a statement of
24authority is not by itself evidence of knowledge or notice of
25the limitation by any person.
26    (d) A grant of authority not pertaining to transfers of

 

 

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1real property and contained in a statement of authority is
2conclusive in favor of a person that is not a member and that
3gives value in reliance on the grant, except to the extent that
4when the person gives value, the person has knowledge to the
5contrary.
6    (e) A certified copy of a statement of authority that
7grants authority to transfer real property held in the name of
8the limited liability company and that is recorded in the
9office for recording transfers of the real property is
10conclusive in favor of a person that is not a member and that
11gives value in reliance on the grant without knowledge to the
12contrary.
13    (f) If a certified copy of a statement of authority
14containing a limitation on the authority to transfer real
15property held in the name of a limited liability company is
16recorded in the office for recording transfers of that real
17property, all persons that are not members are deemed to know
18of the limitation.
19    (g) Unless previously cancelled by a statement of
20cancellation, a statement of authority expires as of the date,
21if any, specified in the statement of authority.
22    (h) If the articles of organization state the authority or
23limitations on the authority of any person on behalf of a
24company, the authority stated or limited shall not bind any
25person who is not a member or manager until that person
26receives actual notice in a record from the company that agency

 

 

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1authority is stated or limited in the articles. If the
2authority stated or limited in the articles of organization
3conflicts with authority stated or limited in a statement of
4authority filed with the Secretary of State under this Section
5on behalf of the company, the statement of authority is the
6effective statement and a person who is not a member or manager
7may rely upon the terms of the filed statement of authority
8notwithstanding conflicting terms in the articles of
9organization.
10(Source: P.A. 99-637, eff. 7-1-17.)
 
11    (805 ILCS 180/15-20)
12    Sec. 15-20. Actions by members.
13    (a) A member may maintain an action against a limited
14liability company, a manager, or another member for legal or
15equitable relief, with or without an accounting as to the
16company's business, to enforce all of the following:
17        (1) The member's rights under the operating agreement.
18        (2) The member's rights under this Act.
19        (3) The rights and otherwise protect the interests of
20    the member, including rights and interests arising
21    independently of the member's relationship to the company.
22    (b) The accrual, and any time limited for the assertion, of
23a right of action for a remedy under this Section is governed
24by other law. A right to an accounting upon a dissolution and
25winding up does not revive a claim barred by law.

 

 

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1(Source: P.A. 90-424, eff. 1-1-98.)
 
2    (805 ILCS 180/30-1)
3    Sec. 30-1. Member's distributional interest.
4    (a) A member is not a co-owner of, and has no transferable
5interest in, property of a limited liability company.
6    (b) A distributional interest in a limited liability
7company is personal property and, subject to Sections 30-5 and
830-10, may be transferred in whole or in part.
9    (c) An operating agreement may provide that a
10distributional interest may be evidenced by a certificate of
11the interest issued by the limited liability company and,
12subject to Section 30-10, may also provide for the transfer of
13any interest represented by the certificate.
14    (d) Except as provided in subsection (b), the rights,
15powers, and interest of a member, including a member described
16in subsection (c) of Section 10-1, may not be transferred
17except in accordance with authority described in the operating
18agreement or if all other members consent.
19(Source: P.A. 90-424, eff. 1-1-98.)
 
20    (805 ILCS 180/35-1)
21    Sec. 35-1. Events causing dissolution and winding up of
22company's business.
23    (a) A limited liability company is dissolved and its
24business must be wound up upon the occurrence of any of the

 

 

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1following events:
2        (1) An event or circumstance that causes the
3    dissolution of a company by the express terms of the
4    operating agreement.
5        (2) The consent of all members.
6        (3) The passage of 180 consecutive days during which
7    the company has no members.
8        (4) On application by a member or a dissociated member,
9    upon entry of a judicial decree that:
10            (A) the economic purpose of the company has been or
11        is likely to be unreasonably frustrated;
12            (B) the conduct of all or substantially all of the
13        company's activities is unlawful;
14            (C) it is not otherwise reasonably practicable to
15        carry on the company's business in conformity with the
16        articles of organization and the operating agreement.
17        (5) On application by a member or transferee of a
18    distributional interest, upon entry of a judicial decree
19    that the managers or those members in control of the
20    company:
21            (A) have acted, are acting, or will act in a manner
22        that is illegal or fraudulent; or
23            (B) have acted or are acting in a manner that is
24        oppressive and was, is, or will be directly harmful to
25        the applicant.
26        (6) Administrative dissolution under Section 35-25.

 

 

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1    (b) In a proceeding under subdivision (4) or (5) of
2subsection (a), the court may order a remedy other than
3dissolution including, but not limited to, a buyout of the
4applicant's distributional membership interest.
5(Source: P.A. 99-637, eff. 7-1-17.)
 
6    (805 ILCS 180/35-45)
7    Sec. 35-45. Events causing member's dissociation. A member
8is dissociated from a limited liability company upon the
9occurrence of any of the following events:
10        (1) The company's having notice of the member's express
11    will to dissociate withdraw upon the date of notice or on a
12    later date specified by the member.
13        (2) An event agreed to in the operating agreement as
14    causing the member's dissociation.
15        (3) Upon transfer of all of a member's distributional
16    interest, other than a transfer for security purposes or a
17    court order charging the member's distributional interest
18    that has not been foreclosed.
19        (4) The member's expulsion pursuant to the operating
20    agreement.
21        (5) The member's expulsion by unanimous vote of the
22    other members if:
23            (A) it is unlawful to carry on the company's
24        business with the member;
25            (B) there has been a transfer of substantially all

 

 

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1        of the member's distributional interest, other than a
2        transfer for security purposes or a court order
3        charging the member's distributional interest that has
4        not been foreclosed;
5            (C) within 90 days after the company notifies a
6        corporate member that it will be expelled because it
7        has filed a certificate of dissolution or the
8        equivalent, its charter has been revoked, or its right
9        to conduct business has been suspended by the
10        jurisdiction of its incorporation, the member fails to
11        obtain a revocation of the certificate of dissolution
12        or a reinstatement of its charter or its right to
13        conduct business; or
14            (D) a partnership or a limited liability company
15        that is a member has been dissolved and its business is
16        being wound up.
17        (6) On application by the company or another member,
18    the member's expulsion by judicial determination because
19    the member:
20            (A) engaged in wrongful conduct that adversely and
21        materially affected the company's business;
22            (B) willfully or persistently committed a material
23        breach of the operating agreement or of a duty owed to
24        the company or the other members under Section 15-3; or
25            (C) engaged in conduct relating to the company's
26        business that makes it not reasonably practicable to

 

 

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1        carry on the business with the member.
2        (7) The member's:
3            (A) becoming a debtor in bankruptcy;
4            (B) executing an assignment for the benefit of
5        creditors;
6            (C) seeking, consenting to, or acquiescing in the
7        appointment of a trustee, receiver, or liquidator of
8        the member or of all or substantially all of the
9        member's property; or
10            (D) failing, within 90 days after the appointment,
11        to have vacated or stayed the appointment of a trustee,
12        receiver, or liquidator of the member or of all or
13        substantially all of the member's property obtained
14        without the member's consent or acquiescence, or
15        failing within 90 days after the expiration of a stay
16        to have the appointment vacated.
17        (8) In the case of a member who is an individual:
18            (A) the member's death;
19            (B) the appointment of a guardian or general
20        conservator for the member; or
21            (C) a judicial determination that the member has
22        otherwise become incapable of performing the member's
23        duties under the operating agreement.
24        (9) In the case of a member that is a trust or is
25    acting as a member by virtue of being a trustee of a trust,
26    distribution of the trust's entire rights to receive

 

 

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1    distributions from the company, but not merely by reason of
2    the substitution of a successor trustee.
3        (10) In the case of a member that is an estate or is
4    acting as a member by virtue of being a personal
5    representative of an estate, distribution of the estate's
6    entire rights to receive distributions from the company,
7    but not merely the substitution of a successor personal
8    representative.
9        (11) Termination of the existence of a member if the
10    member is not an individual, estate, or trust other than a
11    business trust.
12        (12) In the case of a company that participates in a
13    merger under Article 37, if:
14            (A) the company is not the surviving entity; or
15            (B) otherwise as a result of the merger, the person
16        ceases to be a member.
17        (13) The company participates in a conversion under the
18    Entity Omnibus Act.
19        (14) The company participates in a domestication under
20    the Entity Omnibus Act, if, as a result, the person ceases
21    to be a member.
22(Source: P.A. 99-637, eff. 7-1-17; 100-561, eff. 7-1-18.)