Illinois Business Corporation Act

The Illinois Business Corporation Act leaves the resolution of most corporate disputes to a corporation’s officers and board of directors. A court will get involved with a public corporation:

If a shareholder deadlock threatens “irreparable injury” to the corporation or prevents business from being “conducted to the general advantage of the shareholders.” 805 ILCS 5/12.55(a)(1).
If its directors are behaving or will behave illegally, oppressively, or fraudulently, to the detriment of petitioning shareholders
If corporate assets are being wasted. 805 ILCS 5/12.55(a)(2)–(3).

To remedy the situation, the court may appoint a custodian or provisional director to manage the corporation, dissolve the corporation 805 ILCS 5/12.55(b), or order the corporation to purchase the petitioning shareholder’s stake. 805 ILCS 5/12.55(c).

In a non-public corporation, the standards are similar:

If a shareholder deadlock threatens “irreparable injury” to the corporation or prevents business from being “conducted to the general advantage of the shareholders.” 805 ILCS 5/12.56(a)(1). A deadlock justifies court action if the shareholders have been unable to elect directors for two consecutive meetings and that failure to elect threatens the corporation’s shareholders. 805 ILCS 5/12.56(a)(2).
If the directors or corporate owners are behaving or will behave illegally, oppressively, or fraudulently to the detriment of petitioning shareholder(s).
If corporate assets are being wasted. 805 ILCS 5/12.56(a)(3)–(4).

For non-public corporations, courts have a much wider variety of remedies. In addition to the remedies for public companies, courts may order injunctions, alteration of bylaws, appointment or removal of officers and directors, arbitration, damages, or purchase of shares. 805 ILCS 5/12.56(b). Almost any equitable remedy is available. 805 ILCS 5/12.56(c). A court should order dissolution of a non-public corporation only as a last resort. 805 ILCS 5/12.56(b)(12).

To speak to one of our lawyers, get in touch with us at (312) 223-1699 or email Thomas E. Patterson at tpatterson@pattersonlawfirm.com for more advice and information.