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Public Act 102-0230


 

Public Act 0230 102ND GENERAL ASSEMBLY

  
  
  

 


 
Public Act 102-0230
 
SB1795 EnrolledLRB102 00032 KTG 13828 b

    AN ACT concerning business.
 
    Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
 
    Section 5. The Limited Liability Company Act is amended by
changing Sections 15-3 and 15-5 as follows:
 
    (805 ILCS 180/15-3)
    Sec. 15-3. General standards of member and manager's
conduct.
    (a) Without limiting any fiduciary duties owed at common
law, the The fiduciary duties a member owes to a
member-managed company and its other members include the duty
of loyalty and the duty of care referred to in subsections (b)
and (c) of this Section.
    (b) A member's duty of loyalty to a member-managed company
and its other members includes the following:
        (1) to account to the company and to hold as trustee
    for it any property, profit, or benefit derived by the
    member in the conduct or winding up of the company's
    business or derived from a use by the member of the
    company's property, including the appropriation of a
    company's opportunity;
        (2) to act fairly when a member deals with the company
    in the conduct or winding up of the company's business as
    or on behalf of a party having an interest adverse to the
    company; and
        (3) to refrain from competing with the company in the
    conduct of the company's business before the dissolution
    of the company.
    (c) A member's duty of care to a member-managed company
and its other members in the conduct of and winding up of the
company's business is limited to refraining from engaging in
grossly negligent or reckless conduct, intentional misconduct,
or a knowing violation of law.
    (d) The implied contractual covenant of good faith and
fair dealing applies to the operating agreement and members of
a member-managed company in the same manner and to the same
extent that it applies at law to other contracts and parties to
the contracts. A member shall discharge his or her duties to a
member-managed company and its other members under this Act or
under the operating agreement and exercise any rights
consistent with the obligation of good faith and fair dealing.
    (e) A member of a member-managed company does not violate
a duty or obligation under this Act or under the operating
agreement merely because the member's conduct furthers the
member's own interest.
    (f) This Section applies to a person winding up the
limited liability company's business as the personal or legal
representative of the last surviving member as if the person
were a member.
    (g) In a manager-managed company:
        (1) a member who is not also a manager owes no duties
    to the company or to the other members solely by reason of
    being a member;
        (2) a manager is held to the same standards of conduct
    prescribed for members in subsections (b), (c), (d), and
    (e) of this Section;
        (3) a member who exercises some or all of the
    authority of a manager in the and conduct of the company's
    business is held to the standards of conduct in
    subsections (b), (c), (d), and (e) of this Section; and
        (4) a manager is relieved of liability imposed by law
    for violations of the standards prescribed by subsections
    (b), (c), (d), and (e) to the extent of the managerial
    authority delegated to the members by the operating
    agreement; and .
        (5) subsection (d) of this Section applies to the
    operating agreement and members and managers of the
    company.
(Source: P.A. 99-637, eff. 7-1-17.)
 
    (805 ILCS 180/15-5)
    Sec. 15-5. Operating agreement.
    (a) All members of a limited liability company may enter
into an operating agreement to regulate the affairs of the
company and the conduct of its business and to govern
relations among the members, managers, and company. The
operating agreement may establish that a limited liability
company is a manager-managed limited liability company and the
rights and duties under this Act of a person in the capacity of
a manager. To the extent the operating agreement does not
otherwise provide, this Act governs relations among the
members, managers, and company. Except as provided in
subsections (b), (c), (d), and (e) of this Section, an
operating agreement may modify any provision or provisions of
this Act governing relations among the members, managers, and
company.
    (b) The operating agreement may not:
        (1) unreasonably restrict a right to information or
    access to records under Section 1-40 or Section 10-15;
        (2) vary the right to expel a member in an event
    specified in subdivision (6) of Section 35-45;
        (3) vary the requirement to wind up the limited
    liability company's business in a case specified in
    subdivision (4), (5), or (6) of subsection (a) of Section
    35-1;
        (4) restrict rights of a person, other than a manager,
    member, and transferee of a member's distributional
    interest, under this Act;
        (5) restrict the power of a member to dissociate under
    Section 35-50, although an operating agreement may
    determine whether a dissociation is wrongful under Section
    35-50;
        (6) (blank);
        (6.5) eliminate or reduce the obligations or purposes
    a low-profit limited liability company undertakes when
    organized under Section 1-26;
        (7) eliminate or reduce the implied contractual
    covenant obligation of good faith and fair dealing under
    subsection (d) of Section 15-3, but the operating
    agreement may determine the standards by which the
    performance of the member's or manager's duties or the
    exercise of the member's or manager's rights is to be
    measured;
        (8) eliminate, vary, or restrict the priority of a
    statement of authority over provisions in the articles of
    organization as provided in subsection (h) of Section
    13-15;
        (9) vary the law applicable under Section 1-65;
        (10) vary the power of the court under Section 5-50;
    or
        (11) restrict the right to approve a merger,
    conversion, or domestication under Article 37 or the
    Entity Omnibus Act of a member that will have personal
    liability with respect to a surviving, converted, or
    domesticated organization.
    (c) In addition, with respect to fiduciary duties, the The
operating agreement may:
        (1) may not restrict or eliminate a fiduciary duty
    owed at common law or under this Act, unless , other than
    the duty of care described in subsection (c) of Section
    15-3, but only to the extent the restriction or
    elimination in the operating agreement is clear and
    unambiguous;
        (2) may not restrict or eliminate the fiduciary duty
    described in paragraph (2) of subsection (b) of Section
    15-3, except in the manner described in paragraph (4) of
    this subsection (c); identify specific types or categories
    of activities that do not violate any fiduciary duty; and
        (3) may not alter the duty of care, except to
    authorize intentional misconduct or knowing violation of
    law; and .
        (4) may identify, subject to paragraph (1), specific
    types or categories of activities or provide one or more
    examples of activities that do not violate any fiduciary
    duty described in subsection (b) of Section 15-3 or any
    fiduciary duty owed at common law and may determine
    standards by which the performance of the fiduciary duty
    is to be measured.
    The changes made to paragraphs (2) and (4) of this
subsection by this amendatory Act of the 102nd General
Assembly apply to: (i) any operating agreement entered into
before the effective date of this amendatory Act of the 102nd
General Assembly if the fiduciary duties of the members or
managers of the company described in paragraph (2) of
subsection (b) of Section 15-3 are modified in any respect on
or after the effective date of this amendatory Act of the 102nd
General Assembly; and (ii) any operating agreement entered
into on or after the effective date of this amendatory Act of
the 102nd General Assembly.
    (d) The operating agreement may specify the method by
which a specific act or transaction that would otherwise
violate the duty of loyalty may be authorized or ratified by
all the members or by one or more disinterested and
independent members or persons after full disclosure of all
material facts.
    (e) The operating agreement may alter or eliminate the
right to payment or reimbursement for a member or manager
provided by Section 15-7 and may eliminate or limit a member or
manager's liability to the limited liability company and
members for money damages, except for:
        (1) subject to subsections (c) and (d) of this
    Section, breach of the duties as required in subdivisions
    (1), (2), and (3) of subsection (b) of Section 15-3 and
    subsection (g) of Section 15-3;
        (2) a financial benefit received by the member or
    manager to which the member or manager is not entitled;
        (3) a breach of a duty under Section 25-35;
        (4) intentional infliction of harm on the company or a
    member; or
        (5) an intentional violation of criminal law.
    (f) A limited liability company is bound by and may
enforce the operating agreement, whether or not the company
has itself manifested assent to the operating agreement.
    (g) A person that becomes a member of a limited liability
company is deemed to assent to the operating agreement.
    (h) An operating agreement may be entered into before,
after, or at the time of filing of articles of organization
and, whether entered into before, after, or at the time of the
filing, may be made effective as of the time of formation of
the limited liability company or as of the time or date
provided in the operating agreement.
(Source: P.A. 99-637, eff. 7-1-17; 100-561, eff. 7-1-18.)

Effective Date: 1/1/2022