SB1795 EngrossedLRB102 00032 KTG 13828 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 15-3 and 15-5 as follows:
 
6    (805 ILCS 180/15-3)
7    Sec. 15-3. General standards of member and manager's
8conduct.
9    (a) Without limiting any fiduciary duties owed at common
10law, the The fiduciary duties a member owes to a
11member-managed company and its other members include the duty
12of loyalty and the duty of care referred to in subsections (b)
13and (c) of this Section.
14    (b) A member's duty of loyalty to a member-managed company
15and its other members includes the following:
16        (1) to account to the company and to hold as trustee
17    for it any property, profit, or benefit derived by the
18    member in the conduct or winding up of the company's
19    business or derived from a use by the member of the
20    company's property, including the appropriation of a
21    company's opportunity;
22        (2) to act fairly when a member deals with the company
23    in the conduct or winding up of the company's business as

 

 

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1    or on behalf of a party having an interest adverse to the
2    company; and
3        (3) to refrain from competing with the company in the
4    conduct of the company's business before the dissolution
5    of the company.
6    (c) A member's duty of care to a member-managed company
7and its other members in the conduct of and winding up of the
8company's business is limited to refraining from engaging in
9grossly negligent or reckless conduct, intentional misconduct,
10or a knowing violation of law.
11    (d) The implied contractual covenant of good faith and
12fair dealing applies to the operating agreement and members of
13a member-managed company in the same manner and to the same
14extent that it applies at law to other contracts and parties to
15the contracts. A member shall discharge his or her duties to a
16member-managed company and its other members under this Act or
17under the operating agreement and exercise any rights
18consistent with the obligation of good faith and fair dealing.
19    (e) A member of a member-managed company does not violate
20a duty or obligation under this Act or under the operating
21agreement merely because the member's conduct furthers the
22member's own interest.
23    (f) This Section applies to a person winding up the
24limited liability company's business as the personal or legal
25representative of the last surviving member as if the person
26were a member.

 

 

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1    (g) In a manager-managed company:
2        (1) a member who is not also a manager owes no duties
3    to the company or to the other members solely by reason of
4    being a member;
5        (2) a manager is held to the same standards of conduct
6    prescribed for members in subsections (b), (c), (d), and
7    (e) of this Section;
8        (3) a member who exercises some or all of the
9    authority of a manager in the and conduct of the company's
10    business is held to the standards of conduct in
11    subsections (b), (c), (d), and (e) of this Section; and
12        (4) a manager is relieved of liability imposed by law
13    for violations of the standards prescribed by subsections
14    (b), (c), (d), and (e) to the extent of the managerial
15    authority delegated to the members by the operating
16    agreement; and .
17        (5) subsection (d) of this Section applies to the
18    operating agreement and members and managers of the
19    company.
20(Source: P.A. 99-637, eff. 7-1-17.)
 
21    (805 ILCS 180/15-5)
22    Sec. 15-5. Operating agreement.
23    (a) All members of a limited liability company may enter
24into an operating agreement to regulate the affairs of the
25company and the conduct of its business and to govern

 

 

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1relations among the members, managers, and company. The
2operating agreement may establish that a limited liability
3company is a manager-managed limited liability company and the
4rights and duties under this Act of a person in the capacity of
5a manager. To the extent the operating agreement does not
6otherwise provide, this Act governs relations among the
7members, managers, and company. Except as provided in
8subsections (b), (c), (d), and (e) of this Section, an
9operating agreement may modify any provision or provisions of
10this Act governing relations among the members, managers, and
11company.
12    (b) The operating agreement may not:
13        (1) unreasonably restrict a right to information or
14    access to records under Section 1-40 or Section 10-15;
15        (2) vary the right to expel a member in an event
16    specified in subdivision (6) of Section 35-45;
17        (3) vary the requirement to wind up the limited
18    liability company's business in a case specified in
19    subdivision (4), (5), or (6) of subsection (a) of Section
20    35-1;
21        (4) restrict rights of a person, other than a manager,
22    member, and transferee of a member's distributional
23    interest, under this Act;
24        (5) restrict the power of a member to dissociate under
25    Section 35-50, although an operating agreement may
26    determine whether a dissociation is wrongful under Section

 

 

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1    35-50;
2        (6) (blank);
3        (6.5) eliminate or reduce the obligations or purposes
4    a low-profit limited liability company undertakes when
5    organized under Section 1-26;
6        (7) eliminate or reduce the implied contractual
7    covenant obligation of good faith and fair dealing under
8    subsection (d) of Section 15-3, but the operating
9    agreement may determine the standards by which the
10    performance of the member's or manager's duties or the
11    exercise of the member's or manager's rights is to be
12    measured;
13        (8) eliminate, vary, or restrict the priority of a
14    statement of authority over provisions in the articles of
15    organization as provided in subsection (h) of Section
16    13-15;
17        (9) vary the law applicable under Section 1-65;
18        (10) vary the power of the court under Section 5-50;
19    or
20        (11) restrict the right to approve a merger,
21    conversion, or domestication under Article 37 or the
22    Entity Omnibus Act of a member that will have personal
23    liability with respect to a surviving, converted, or
24    domesticated organization.
25    (c) In addition, with respect to fiduciary duties, the The
26operating agreement may:

 

 

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1        (1) may not restrict or eliminate a fiduciary duty
2    owed at common law or under this Act, unless , other than
3    the duty of care described in subsection (c) of Section
4    15-3, but only to the extent the restriction or
5    elimination in the operating agreement is clear and
6    unambiguous;
7        (2) may not restrict or eliminate the fiduciary duty
8    described in paragraph (2) of subsection (b) of Section
9    15-3, except in the manner described in paragraph (4) of
10    this subsection (c); identify specific types or categories
11    of activities that do not violate any fiduciary duty; and
12        (3) may not alter the duty of care, except to
13    authorize intentional misconduct or knowing violation of
14    law; and .
15        (4) may identify, subject to paragraph (1), specific
16    types or categories of activities or provide one or more
17    examples of activities that do not violate any fiduciary
18    duty described in subsection (b) of Section 15-3 or any
19    fiduciary duty owed at common law and may determine
20    standards by which the performance of the fiduciary duty
21    is to be measured.
22    The changes made to paragraphs (2) and (4) of this
23subsection by this amendatory Act of the 102nd General
24Assembly apply to: (i) any operating agreement entered into
25before the effective date of this amendatory Act of the 102nd
26General Assembly if the fiduciary duties of the members or

 

 

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1managers of the company described in paragraph (2) of
2subsection (b) of Section 15-3 are modified in any respect on
3or after the effective date of this amendatory Act of the 102nd
4General Assembly; and (ii) any operating agreement entered
5into on or after the effective date of this amendatory Act of
6the 102nd General Assembly.
7    (d) The operating agreement may specify the method by
8which a specific act or transaction that would otherwise
9violate the duty of loyalty may be authorized or ratified by
10all the members or by one or more disinterested and
11independent members or persons after full disclosure of all
12material facts.
13    (e) The operating agreement may alter or eliminate the
14right to payment or reimbursement for a member or manager
15provided by Section 15-7 and may eliminate or limit a member or
16manager's liability to the limited liability company and
17members for money damages, except for:
18        (1) subject to subsections (c) and (d) of this
19    Section, breach of the duties as required in subdivisions
20    (1), (2), and (3) of subsection (b) of Section 15-3 and
21    subsection (g) of Section 15-3;
22        (2) a financial benefit received by the member or
23    manager to which the member or manager is not entitled;
24        (3) a breach of a duty under Section 25-35;
25        (4) intentional infliction of harm on the company or a
26    member; or

 

 

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1        (5) an intentional violation of criminal law.
2    (f) A limited liability company is bound by and may
3enforce the operating agreement, whether or not the company
4has itself manifested assent to the operating agreement.
5    (g) A person that becomes a member of a limited liability
6company is deemed to assent to the operating agreement.
7    (h) An operating agreement may be entered into before,
8after, or at the time of filing of articles of organization
9and, whether entered into before, after, or at the time of the
10filing, may be made effective as of the time of formation of
11the limited liability company or as of the time or date
12provided in the operating agreement.
13(Source: P.A. 99-637, eff. 7-1-17; 100-561, eff. 7-1-18.)