101ST GENERAL ASSEMBLY
State of Illinois
2019 and 2020
SB1522

 

Introduced 2/15/2019, by Sen. Don Harmon

 

SYNOPSIS AS INTRODUCED:
 
805 ILCS 180/10-10
805 ILCS 180/15-5

    Amends the Limited Liability Company Act. Deletes a provision that provides that all or specified members of a limited liability company are liable in their capacity as members for all or specified debts, obligations, or liabilities of the company if: (i) a provision to that effect is contained in the articles of organization and (ii) a member so liable has consented in writing to the adoption of the provision or to be bound by the provision. Provides that with respect to imposing liability upon a member because of a member's personal conduct, nothing in the Act shall be deemed to limit the effect of law other than the Act. Provides that a limited liability company's operating agreement may not restrict the duty to act fairly as described in the Act. Provides that the operating agreement may identify the standards by which the obligation to act fairly is measured.


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A BILL FOR

 

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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 10-10 and 15-5 as follows:
 
6    (805 ILCS 180/10-10)
7    Sec. 10-10. Liability of members and managers.
8    (a) The Except as otherwise provided in subsection (d) of
9this Section, the debts, obligations, and liabilities of a
10limited liability company, whether arising in contract, tort,
11or otherwise, are solely the debts, obligations, and
12liabilities of the company. A member or manager is not
13personally liable for a debt, obligation, or liability of the
14company solely by reason of being or acting as a member or
15manager.
16    (b) (Blank).
17    (b-5) With respect to imposing liability upon a member
18because of a member's personal conduct, nothing in this Act
19shall be deemed to limit the effect of law other than this Act.
20    (c) The failure of a limited liability company to observe
21the usual company formalities or requirements relating to the
22exercise of its company powers or management of its business is
23not a ground for imposing personal liability on the members or

 

 

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1managers for liabilities of the company.
2    (d) (Blank). All or specified members of a limited
3liability company are liable in their capacity as members for
4all or specified debts, obligations, or liabilities of the
5company if:
6        (1) a provision to that effect is contained in the
7    articles of organization; and
8        (2) a member so liable has consented in writing to the
9    adoption of the provision or to be bound by the provision.
10(Source: P.A. 90-424, eff. 1-1-98.)
 
11    (805 ILCS 180/15-5)
12    Sec. 15-5. Operating agreement.
13    (a) All members of a limited liability company may enter
14into an operating agreement to regulate the affairs of the
15company and the conduct of its business and to govern relations
16among the members, managers, and company. The operating
17agreement may establish that a limited liability company is a
18manager-managed limited liability company and the rights and
19duties under this Act of a person in the capacity of a manager.
20To the extent the operating agreement does not otherwise
21provide, this Act governs relations among the members,
22managers, and company. Except as provided in subsections (b),
23(c), (d), and (e) of this Section, an operating agreement may
24modify any provision or provisions of this Act governing
25relations among the members, managers, and company.

 

 

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1    (b) The operating agreement may not:
2        (1) unreasonably restrict a right to information or
3    access to records under Section 1-40 or Section 10-15;
4        (2) vary the right to expel a member in an event
5    specified in subdivision (6) of Section 35-45;
6        (3) vary the requirement to wind up the limited
7    liability company's business in a case specified in
8    subdivision (4), (5), or (6) of subsection (a) of Section
9    35-1;
10        (4) restrict rights of a person, other than a manager,
11    member, and transferee of a member's distributional
12    interest, under this Act;
13        (5) restrict the power of a member to dissociate under
14    Section 35-50, although an operating agreement may
15    determine whether a dissociation is wrongful under Section
16    35-50;
17        (6) (blank);
18        (6.5) eliminate or reduce the obligations or purposes a
19    low-profit limited liability company undertakes when
20    organized under Section 1-26;
21        (7) eliminate or reduce the obligation of good faith
22    and fair dealing under subsection (d) of Section 15-3, but
23    the operating agreement may determine the standards by
24    which the performance of the member's duties or the
25    exercise of the member's rights is to be measured;
26        (8) eliminate, vary, or restrict the priority of a

 

 

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1    statement of authority over provisions in the articles of
2    organization as provided in subsection (h) of Section
3    13-15;
4        (9) vary the law applicable under Section 1-65;
5        (10) vary the power of the court under Section 5-50; or
6        (11) restrict the right to approve a merger,
7    conversion, or domestication under Article 37 or the Entity
8    Omnibus Act of a member that will have personal liability
9    with respect to a surviving, converted, or domesticated
10    organization.
11    (c) The operating agreement may:
12        (1) restrict or eliminate a fiduciary duty, other than
13    the duty to act fairly as described in paragraph (2) of
14    subsection (b) of Section 15-3, or the duty of care
15    described in subsection (c) of Section 15-3, but only to
16    the extent the restriction or elimination in the operating
17    agreement is clear and unambiguous;
18        (2) identify specific types or categories of
19    activities that do not violate any fiduciary duty; and
20        (3) alter the duty of care, except to authorize
21    intentional misconduct or knowing violation of law; and .
22        (4) identify the standards by which the obligation to
23    act fairly is measured.
24    (d) The operating agreement may specify the method by which
25a specific act or transaction that would otherwise violate the
26duty of loyalty may be authorized or ratified by one or more

 

 

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1disinterested and independent persons after full disclosure of
2all material facts.
3    (e) The operating agreement may alter or eliminate the
4right to payment or reimbursement for a member or manager
5provided by Section 15-7 and may eliminate or limit a member or
6manager's liability to the limited liability company and
7members for money damages, except for:
8        (1) subject to subsections (c) and (d) of this Section,
9    breach of the duties as required in subdivisions (1), (2),
10    and (3) of subsection (b) of Section 15-3 and subsection
11    (g) of Section 15-3;
12        (2) a financial benefit received by the member or
13    manager to which the member or manager is not entitled;
14        (3) a breach of a duty under Section 25-35;
15        (4) intentional infliction of harm on the company or a
16    member; or
17        (5) an intentional violation of criminal law.
18    (f) A limited liability company is bound by and may enforce
19the operating agreement, whether or not the company has itself
20manifested assent to the operating agreement.
21    (g) A person that becomes a member of a limited liability
22company is deemed to assent to the operating agreement.
23    (h) An operating agreement may be entered into before,
24after, or at the time of filing of articles of organization
25and, whether entered into before, after, or at the time of the
26filing, may be made effective as of the time of formation of

 

 

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1the limited liability company or as of the time or date
2provided in the operating agreement.
3(Source: P.A. 99-637, eff. 7-1-17; 100-561, eff. 7-1-18.)