As a shareholder in an Illinois corporation or a member of an LLC, your investment and interests are directly tied to the company’s well-being. There may be times when you need to review records to protect your interests.
The state of Illinois requires companies to maintain the following records:
- The LLC Operating Agreement
- The Articles of Organization
- Tax returns of the last 3 years
- List of officers
Most companies maintain additional records: general ledgers, income statements, minutes of meetings, and contracts with suppliers. Under the Illinois Business Corporation Act, shareholders have access to these records when reasonably needed at any time. Members of an LLC have similar rights. However, this does not mean that the officers are always happy to comply.
How to Access Records
In Illinois, shareholders and LLC members with a proper purpose have the right to review accounting records, meeting minutes, and the identity of other shareholders and LLC members. A proper purpose is an “honest and with good faith” purpose to protect one’s interests. It is not fishing for information to satisfy curiosities. To access these records, the shareholder or LLC member must write a formal request to the company and specify the records requested. A shareholder does not need to suspect the directors of wrongdoing in order to access records. However, shareholders must explicitly state the reason for their request.
When Your Request is Denied
If the company refuses, the requester of records may file suit in the circuit court where the company is registered. The court will hold a hearing. It is the shareholder’s burden to establish that they have proper purpose to review financial records. The corporation has a burden to establish that the shareholder lacks a proper purpose to view other corporate documents. Illinois has a broad definition of proper purpose.
If a court finds that the corporation has wrongfully withheld records, a court may hold the officers liable. The penalty can be up to 10% of the value of the shareholder’s shares and attorney fees.
Because of these rights, there is no reason for any interest holder to remain ignorant of the financial performance of their own company. If you are a shareholder or an LLC member in Illinois and are unable to access records, contact our Chicago shareholder dispute lawyers today.