Full Text of SB1795 102nd General Assembly
SB1795enr 102ND GENERAL ASSEMBLY |
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| 1 | | AN ACT concerning business.
| 2 | | Be it enacted by the People of the State of Illinois,
| 3 | | represented in the General Assembly:
| 4 | | Section 5. The Limited Liability Company Act is amended by | 5 | | changing 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 | 8 | | conduct.
| 9 | | (a) Without limiting any fiduciary duties owed at common | 10 | | law, the The fiduciary duties a member owes to a | 11 | | member-managed company and its
other members include the duty | 12 | | of loyalty and the duty of care referred to in
subsections (b) | 13 | | and (c) of this Section.
| 14 | | (b) A member's duty of loyalty to a member-managed company | 15 | | and 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 | 7 | | and its other
members in the conduct of and winding up of the | 8 | | company's business is limited to
refraining from engaging in | 9 | | grossly negligent or reckless conduct, intentional
misconduct, | 10 | | or a knowing violation of law.
| 11 | | (d) The implied contractual covenant of good faith and | 12 | | fair dealing applies to the operating agreement and members of | 13 | | a member-managed company in the same manner and to the same | 14 | | extent that it applies at law to other contracts and parties to | 15 | | the contracts. A member shall discharge his or her duties to a | 16 | | member-managed company
and its other members under this Act or | 17 | | under the operating agreement and
exercise any rights | 18 | | consistent with the obligation of good faith and fair
dealing.
| 19 | | (e) A member of a member-managed company does not violate | 20 | | a duty or
obligation under this Act or under the operating | 21 | | agreement merely because the
member's conduct furthers the | 22 | | member's own interest.
| 23 | | (f) This Section applies to a person winding up the | 24 | | limited liability
company's business as the personal or legal | 25 | | representative of the last
surviving member as if the person | 26 | | were 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 | 24 | | into an operating agreement to
regulate the affairs of the | 25 | | company and the conduct of its business and to
govern |
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| 1 | | relations among the members, managers, and company. The | 2 | | operating agreement may establish that a limited liability | 3 | | company is a manager-managed limited liability company and the | 4 | | rights and duties under this Act of a person in the capacity of | 5 | | a manager. To the extent
the operating agreement does not | 6 | | otherwise provide, this Act governs relations
among the | 7 | | members, managers, and company.
Except as provided in | 8 | | subsections (b), (c), (d), and (e) of this Section, an | 9 | | operating agreement
may modify any provision or provisions of | 10 | | this Act governing relations among
the members, managers, and | 11 | | company.
| 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 | 26 | | operating 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 | 23 | | subsection by this amendatory Act of the 102nd General | 24 | | Assembly apply to: (i) any operating agreement entered into | 25 | | before the effective date of this amendatory Act of the 102nd | 26 | | General Assembly if the fiduciary duties of the members or |
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| 1 | | managers of the company described in paragraph (2) of | 2 | | subsection (b) of Section 15-3 are modified in any respect on | 3 | | or after the effective date of this amendatory Act of the 102nd | 4 | | General Assembly; and (ii) any operating agreement entered | 5 | | into on or after the effective date of this amendatory Act of | 6 | | the 102nd General Assembly. | 7 | | (d) The operating agreement may specify the method by | 8 | | which a specific act or transaction that would otherwise | 9 | | violate the duty of loyalty may be authorized or ratified by | 10 | | all the members or by one or more disinterested and | 11 | | independent members or persons after full disclosure of all | 12 | | material facts. | 13 | | (e) The operating agreement may alter or eliminate the | 14 | | right to payment or reimbursement for a member or manager | 15 | | provided by Section 15-7 and may eliminate or limit a member or | 16 | | manager's liability to the limited liability company and | 17 | | members 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 | 3 | | enforce the operating agreement, whether or not the company | 4 | | has itself manifested assent to the operating agreement. | 5 | | (g) A person that becomes a member of a limited liability | 6 | | company is deemed to assent to the operating agreement. | 7 | | (h) An operating agreement may be entered into before, | 8 | | after, or at the time of filing of articles of organization | 9 | | and, whether entered into before, after, or at the time of the | 10 | | filing, may be made effective as of the time of formation of | 11 | | the limited liability company or as of the time or date | 12 | | provided in the operating agreement.
| 13 | | (Source: P.A. 99-637, eff. 7-1-17; 100-561, eff. 7-1-18 .)
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