Dec 08, 2016
Getting ready for the 2017 changes to the Illinois LLC Act
While we all know that budgetary gridlock in Springfield is ongoing, earlier this year, the Illinois legislature passed, and Governor Rauner signed, legislation that makes significant changes to the Illinois Limited Liability Company Act (the LLC Act). These changes are effective July 1, 2017. To give you an idea of the scope of the changes, the printer friendly version of Public Act 099-0637 on the Illinois legislature website is 112 pages long.
This article captures only a handful of the key changes to the legislation and is not even close to being an exhaustive summary or list:
- Modifies the definition of Operating Agreement to include oral agreements, and provides a specific exemption from the Illinois statute of frauds;
- Provides that for a transferee who holds a distributional interest in the LLC, but is not a member of the LLC, the transferee has the right to access and inspect books and records of the LLC, but only for a proper purpose;
- Provides a default rule that an LLC is “member-managed” unless set forth in the Operating Agreement;
- Expands on rights of members, including dissociated members, to access books and records of the LLC, and includes specific time periods for complying with requests for information;
- Creates a new form for filing with the state, a Statement of Authority, which will provide publicly the authority, or limitations on authority, of specific members or managers who can execute instruments transferring real estate property held in the name of the LLC or entering into other transactions that would bind the LLC;
- Removes the restriction that an LLC Operating Agreement may not eliminate or reduce a member’s fiduciary duties, and adds specifics as to how an Operating Agreement can restrict or eliminate that fiduciary duty (except an Operating Agreement may not authorize intentional misconduct or knowing violation of law, and may not alter or eliminate the obligations of good faith and fair dealing);
- Modifies the specific rights of a judgment creditor against the LLC, and, importantly, limits the creditor to distributional rights; and
- Expands on the process of converting others forms of entities to or from an LLC.
The changes to the LLC Act may warrant changes to existing Operating Agreements. We recommend that current LLCs consult their attorneys and make that determination.
This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.
Client Alert authored by: Mitchell D. Weinstein, Principal
This alert originally appeared in the Winter 2016 Corporate Focus newsletter.