Changes to the Illinois LLC Act Going into Effect for 2017
On July 28, 2016, Governor Rauner signed into law Public Act 099-0637 (Act) making extensive changes to the Illinois Limited Liability Company (LLC) Act. Significant changes to the law affecting LLCs organized under Illinois law will go into effect on July 1, 2017.
The amended Illinois LLC Act will now allow a transferee of a distributional interest to review the records of a LLC. To review these records, a transferee must make a written records demand upon the LLC, and the request must be for a proper purpose. Within 10 days, the LLC must either provide or describe the records to be reviewed, or state the reasons that the LLC declines the demand.
The Act will also provide that operating agreements are valid even if they are unwritten or unsigned.
The amended LLC Act will also alter membership rights within a LLC. The Act will provide that a member is not automatically be an agent of the LLC solely because she is a member. A LLC wishing to show a member or manager has authority on behalf of the LLC may deliver to the Secretary of State a statement of authority. On the contrary, the LLC can deliver a statement of denial to the Secretary of State to limit a member or manager's rights.
One of the most significant changes enacted by the amended LLC Act is that unless specifically stated in the Operating Agreement, a LLC will be member managed.
The Act alters the rights and duties that members may have, permits the duty of loyalty to be eliminated, and permits the duty of care to be limited. The Act also grants the authority for the LLC's Operating Agreement to detail the specific remedies and consequences when a member fails to make a required contribution.
Additionally, the Act adds a new section of law stating that if a member dies, the deceased member's personal representative may exercise the rights of the member. The Act also adds language which dictates how an organization my convert to a LLC, and vice versa, as well as the consequences of said conversion. Similarly, the Act amends the procedure for merger by constituent. The Act also dictates how a foreign LLC may become a domestic LLC.
The LLC Act amends the events which result in dissolution of the LLC and how the LLC is wound up, as well as the manner in which a LLC will operate after dissolution. For example, instead of executing Articles of Termination before operations cease, it may execute a statement of termination after a LLC has been wound up. Further, if a LLC has been administratively dissolved, the LLC's name cannot be used by another LLC or corporation for three years following the dissolution.
For assistance with any matters involving formation and management of an LLC or other entity, please contact the experienced Business attorneys at Bozeman, Neighbour, Patton & Noe, LLP.