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Legislative updates

House Bill 3577, signed by the Governor August 13, 2021 and effective July 1, 2021, amends the limited worker cooperative association law regarding, among other things, definitions, powers of the secretary of state, application of the LLC Act, name requirements, cooperative agreements, annual reports, fees, administrative dissolution and reinstatement.


Senate Bill 1480, which was signed by the governor on March 23, 2021, amends the provision of the Business Corporation Act governing the contents of the annual report required to be filed by domestic and qualified foreign corporations to provide that for those corporations required to file an Employer Information Report EEO-1 with the Equal Employment Opportunity Commission, the annual report must include information that is substantially similar to the employment data reported under Section D of the corporation’s EEO-1 in a format provided by the Secretary of State. (An EEO-1 is required of employers who have at least 100 employees and federal contractors who have at least 50 employees and a contract of $50,000 or more. The report asks for information about employees' job categories, ethnicity, race, and gender.) SB 1480 also provides that for each corporation that provides the data the Secretary of State shall publish the data on the gender, race and ethnicity of each corporation’s employees on the Secretary of State’s official website. This information shall be included in the corporation’s annual report filed on and after January 1, 2023.


Senate Bill 2992, effective January 1, 2020, amends the business corporation, not for profit corporation, LLC, LLP, and LP laws regarding the Secretary of State’s duties to inform the state Commerce Commission of those entities that were administratively dissolved or revoked.


House Bill 2528, effective January 1, 2020, amends the Assumed Business Name Act regarding a person conducting business under an assumed name at his or her personal residence.


House Bill 3663, effective January 1, 2020, enacts the Limited Worker Cooperative Association Act, authorizing the formation of a limited cooperative association, which may be formed for any purpose, whether or not for profit. An association may elect to be a worker cooperative. A limited cooperative is formed by filing articles of organization. It is managed by a board of directors.


Case summaries

Usurpation of Corporate Opportunity
Indeck Energy Services, Inc. v Depodesta, 2021 IL 125733, decided July 29, 2021. The Illinois Supreme Court held that a cause of action for usurpation of a corporate opportunity requires a plaintiff to establish that the opportunity has in fact been taken. Because the funding opportunity was still available to plaintiff at the time of trial, there was no usurpation by defendants.


Venue over LLC
Braun v. Aspide Medical, 2020 IL App. (1st) 200131, decided November 4, 2020. The Illinois Appellate Court held that venue over a domestic LLC was proper in a county in which part of the transaction from which the claim arose occurred. In so holding the court discussed, but declined to resolve the open issue of whether an LLC should be treated as a corporation or partnership or a voluntary unincorporated entity for the purpose of determining where it resides for venue purposes as the venue statute does not refer to LLCs.


LLC – Economic Interest Holder’s Rights
Doherty v. Country Faire Conversion, LLC, 2020 IL App. (1st) 192385, decided November 2, 2020. The Illinois Appellate Court held that the purchaser of an interest in an LLC lacked standing to bring claims for breach of fiduciary duty, to obtain an accounting, and to challenge the indemnification of a manager. The purchaser did not obtain the unanimous consent of the members needed to become a member and as an economic interest holder only, lacked standing under the operating agreement and LLC Act to maintain a derivative suit or seek an accounting.


Service of Process
Commonwealth Edison Co. v. Carlisle Utility Contractors, Inc., 2020 IL App. 200178-U, decided September 18, 2020. The Illinois Appellate Court upheld the default judgment entered against an Indiana corporation who appointed its president as its registered agent in Illinois and an Illinois address as the registered office. The plaintiff’s process server made numerous attempts to serve the registered agent at the Illinois address but each time was told he was not there. The plaintiff then obtained substituted service on the Secretary of State. In upholding service of process the court ruled that the plaintiff complied with the service provisions of the Illinois corporation law by mailing a copy of process to the Illinois registered office and was not required to also mail copies to addresses for the corporation in Indiana that it was aware of.


Foreign Corporation’s Liability for Franchise Taxes and Failure to Qualify
Global Mail, Inc. v. White, 2019 IL App (1st) 181778, decided December 6, 2019. The Illinois Appellate Court affirmed the trial court’s ruling that where a Delaware corporation, qualified to do business in Illinois, merged into an Ohio corporation, which continued doing business, the Illinois Secretary of State was only entitled to franchise taxes from the Ohio corporation. Although the Delaware corporation did not withdraw as required by the corporation act and the Ohio corporation’s annual report continued to list Delaware as the state of incorporation, the Delaware corporation ceased to exist and did not owe franchise taxes. The court also ruled that a statement of correction could be filed to correct the state of incorporation on the annual reports, and that the penalty imposed on the Ohio corporation for doing business without authority did not include an interest charge on a late franchise tax payment as that was not provided for by the business corporation act.


LLC Member Liability
Fifth Third Mortgage Company v. Kaufman, No. 18-3295, decided August 9, 2019 The US Court of Appeals, 7th Circuit held that a member of an Illinois LLC was not shielded from personal liability in a suit arising out of a mortgage fraud scheme where he participated in the fraud for his own gain and was sued in his individual capacity and not as a member of the LLC which was also held liable.


Other notices

August, 2020 — The Illinois Secretary of State has posted a notice on its website about a “non-governmental firm” contacting Illinois businesses in an attempt to collect a fee for a form entitled a "Certificate of Status" which, according to the notice business organizations are not required to obtain. The entire notice can be read on the SOS’s website.