On July 30, 2021 Governor Pritzker approved Senate Bill 1795, which amended the Limited Liability Company Act. This bill provides that any statutory fiduciary duties that a member may owe to a member-managed company and other members do not limit any fiduciary duties owed under the common law. The bill also makes changes relating to the extent to which an operating agreement may restrict or eliminate fiduciary duties owed under the common law or the LLCA. Under these changes, the operating agreement may not restrict or eliminate a fiduciary duty owed under the common law or the LLCA (unless the restriction is clear and unambiguous), and may not alter the duty of care to authorize intentional misconduct or a knowing violation of the law. However, the operating agreement may identify specific categories or types of activities that do not violate any fiduciary duty, and may determine the standards by which the performance of the fiduciary duties owed under the common law are to be measured. Furthermore, this bill removes a provision in the LLCA that required a member to discharge their duty to a member-managed company or its other members (under the LLCA or the operating agreement) and the exercise of any rights consistent with the covenant of good faith and fair dealing. Rather, Senate Bill 1795 provides that the implied covenant of good faith and fair dealing applies to the members of member-managed companies and the operating agreement in the same manner and to the same extent that it applies to other contracts and parties to the contracts. This bill will go into effect January 1, 2022.
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