Chicago Business Litigation Lawyer Blog
In Illinois, the concept of LLC member or shareholder oppression is generally conceived as actions that are “illegal, oppressive, or fraudulent”. For shareholders of a corpo”ration that has no shares listed on a national securities exchange or regularly traded in a market maintained by one or more members of a national or affiliated securities association, the Illinois Business Corporation Act (IBCA) states that the Circuit Court may intervene if it is established that the directors or those in control of the corporation have acted, are acting, or will act in a manner that is illegal, oppressive, or fraudulent with respect to the petitioning shareholder.
In the context of LLC members, the Illinois Limited Liability Company Act (805 ILCS 180/35-1) provides for the dissolution of the company upon the application by a member or transferee of a distributional interest, upon entry of a judicial decree that the managers or those members in control of the company have acted or are acting in a manner that is oppressive and was, is, or will be directly harmful to the applican].
However, it’s important to note that in a manager-managed LLC, a member who is not also a manager does not violate a duty or obligation under the Act or under the operating agreement merely because the member’s conduct furthers the member’s own interest.
The specific conduct that courts have found to be oppressive varies. Some cases have found that conduct is oppressive if it is “arbitrary, overbearing and heavy-handed”. Other cases have found that even where corporate formalities are observed, the payment of a high amount of compensation to corporate officers, while refusing to pay dividends to benefit minority shareholders, can be considered oppressive conduct, depending on the corporation’s overall financial picture. Continue reading ›