Full Text of SB0533 94th General Assembly
SB0533 94TH GENERAL ASSEMBLY
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94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006 SB0533
Introduced 2/17/2005, by Sen. Ira I. Silverstein SYNOPSIS AS INTRODUCED: |
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805 ILCS 5/7.90 new |
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805 ILCS 5/12.56 |
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Amends the Business Corporation Act of 1983. Provides that unless otherwise provided in the articles of incorporation, a shareholder who executes and delivers to the corporation a written instrument irrevocably waiving the right (i) to vote any shares held by such shareholder, whether for the election of directors or otherwise, (ii) to be a director or officer of the corporation, and (iii) in any other manner to control, directly or indirectly, corporate actions or the election or removal of any director or officer of the corporation, and who at the time of such waiver is not a director or officer of the corporation, shall have no fiduciary duty to the corporation or any of its shareholders arising out of the fact that such person is a shareholder of the corporation. Provides that the corporation shall give prompt notice of such waiver to the remaining shareholders, except that no such notice need be given by a corporation that has 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. Effective July 1, 2005.
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A BILL FOR
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SB0533 |
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LRB094 09955 RXD 40213 b |
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| AN ACT concerning business.
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| Be it enacted by the People of the State of Illinois,
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| represented in the General Assembly:
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| Section 5. The Business Corporation Act of 1983 is amended | 5 |
| by changing Section 12.56 and adding Section 7.90 as follows: | 6 |
| (805 ILCS 5/7.90 new) | 7 |
| Sec. 7.90. Waiver.
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| (a) Unless otherwise provided in the articles of | 9 |
| incorporation, a shareholder who executes and delivers to the | 10 |
| corporation a written instrument irrevocably waiving the right | 11 |
| (i) to vote any shares held by such shareholder, whether for | 12 |
| the election of directors or otherwise, (ii) to be a director | 13 |
| or officer of the corporation, and (iii) in any other manner to | 14 |
| control, directly or indirectly, corporate actions or the | 15 |
| election or removal of any director or officer of the | 16 |
| corporation, and who at the time of such waiver is not a | 17 |
| director or officer of the corporation, shall have no fiduciary | 18 |
| duty to the corporation or any of its shareholders arising out | 19 |
| of the fact that such person is a shareholder of the | 20 |
| corporation. No such waiver shall affect any breach of | 21 |
| fiduciary duty arising prior to the effective date of the | 22 |
| waiver. | 23 |
| (b) The corporation shall give prompt notice of such waiver | 24 |
| to the remaining shareholders, except that no such notice need | 25 |
| be given by a corporation that has shares listed on a national | 26 |
| securities exchange or regularly traded in a market maintained | 27 |
| by one or more members of a national or affiliated securities | 28 |
| association.
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| (c) The waiver referred to in this Section shall not affect | 30 |
| any other rights or obligations of the shareholder, including | 31 |
| but not limited to the rights under Sections 7.80, 11.65, | 32 |
| 11.70, 12.55 and 12.56 of this Act.
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| (d) Shares that cannot be voted because of a waiver under | 2 |
| this Section shall not be counted in determining the number of | 3 |
| shares necessary for a quorum or for shareholder action under | 4 |
| Section 7.60 of this Act. A waiver under this Section shall not | 5 |
| apply to any transferee of the shares.
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| (e) The waiver referred to in this Section is specifically | 7 |
| enforceable in accordance with the principles of equity.
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| (f) This Section is not intended to describe or suggest the | 9 |
| circumstances under which any fiduciary duty arises or exists, | 10 |
| including with respect to any shareholder who fails to make a | 11 |
| waiver under this Section.
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| (805 ILCS 5/12.56)
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| Sec. 12.56. Shareholder remedies: non-public corporations.
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| (a) In an action by a shareholder in a corporation that has
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| no shares listed on a national securities exchange or regularly
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| traded in a market maintained by one or more members of a
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| national or affiliated securities association, the Circuit | 18 |
| Court
may order one or more of the remedies listed in | 19 |
| subsection (b) if
it is established that:
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| (1) The directors are deadlocked, whether because of
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| even division in the number of directors or because of | 22 |
| greater than
majority voting requirements in the articles | 23 |
| of incorporation or
the by-laws or otherwise, in the | 24 |
| management of the corporate
affairs; the shareholders are | 25 |
| unable to break the deadlock; and
either irreparable injury | 26 |
| to the corporation is thereby caused or
threatened or the | 27 |
| business of the corporation can no longer be
conducted to | 28 |
| the general advantage of the shareholders; or
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| (2) The shareholders are deadlocked in voting power
and | 30 |
| have failed, for a period that includes at least 2
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| consecutive annual meeting dates, to elect successors to
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| directors whose terms have expired and either irreparable | 33 |
| injury
to the corporation is thereby caused or threatened | 34 |
| or the
business of the corporation can no longer be | 35 |
| conducted to the
general advantage of the shareholders; or
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| (3) The directors or those in control of the
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| corporation have acted, are acting, or will act in a manner | 3 |
| that
is illegal, oppressive, or fraudulent with respect to | 4 |
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petitioning shareholder whether in his or her capacity | 5 |
| as a
shareholder, director, or officer; or
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| (4) The corporation assets are being misapplied or
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| wasted.
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| (b) The relief which the court may order in an action under
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| subsection (a) includes but is not limited to the following:
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| (1) The performance, prohibition, alteration, or
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| setting aside of any action of the corporation or of its
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| shareholders, directors, or officers of or any other party | 13 |
| to the
proceedings;
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| (2) The cancellation or alteration of any provision in
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| the corporation's articles of incorporation or by-laws;
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| (3) The removal from office of any director or
officer;
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| (4) The appointment of any individual as a director or
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| officer;
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| (5) An accounting with respect to any matter in
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| dispute;
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| (6) The appointment of a custodian to manage the
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| business and affairs of the corporation to serve for the | 23 |
| term and
under the conditions prescribed by the court;
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| (7) The appointment of a provisional director to serve
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| for the term and under the conditions prescribed by the | 26 |
| court;
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| (8) The submission of the dispute to mediation or
other | 28 |
| forms of non-binding alternative dispute resolution;
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| (9) The payment of dividends;
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| (10) The award of damages to any aggrieved party;
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| (11) The purchase by the corporation or one or more
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| other shareholders of all, but not less than all, of the | 33 |
| shares
of the petitioning shareholder for their fair value | 34 |
| and on the
terms determined under subsection (e); or
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| (12) The dissolution of the corporation if the court
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| determines that no remedy specified in subdivisions (1) |
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| through
(11) or other alternative remedy is sufficient to | 2 |
| resolve the
matters in dispute. In determining whether to | 3 |
| dissolve the
corporation, the court shall consider among | 4 |
| other relevant
evidence the financial condition of the | 5 |
| corporation but may not
refuse to dissolve the corporation | 6 |
| solely because it has
accumulated earnings or current | 7 |
| operating profits.
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| (c) The remedies set forth in subsection (b) shall not be
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| exclusive of other legal and equitable remedies which the court
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| may impose.
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| (d) In determining the appropriate relief to order pursuant
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| to this Section, the court may take into consideration the
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| reasonable expectations of the corporation's shareholders as | 14 |
| they
existed at the time the corporation was formed and | 15 |
| developed
during the course of the shareholders' relationship | 16 |
| with the
corporation and with each other.
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| (e) If the court orders a share purchase,
it shall:
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| (i) Determine the fair value of the shares, with or
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| without the assistance of appraisers, taking into | 20 |
| account any
impact on the value of the shares resulting | 21 |
| from the actions
giving rise to a petition under this | 22 |
| Section;
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| (ii) Consider any financial or legal constraints | 24 |
| on the
ability of the corporation or the purchasing | 25 |
| shareholder to
purchase the shares;
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| (iii) Specify the terms of the purchase, | 27 |
| including, if
appropriate, terms for installment | 28 |
| payments, interest at the rate
and from the date | 29 |
| determined by the court to be equitable,
subordination | 30 |
| of the purchase obligation to the rights of the
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| corporation's other creditors, security for a deferred | 32 |
| purchase
price, and a covenant not to compete or other | 33 |
| restriction on the
seller;
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| (iv) Require the seller to deliver all of his or | 35 |
| her
shares to the purchaser upon receipt of the | 36 |
| purchase price or the
first installment of the purchase |
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| price; and
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| (v) Retain jurisdiction to enforce the purchase | 3 |
| order
by, among other remedies, ordering the | 4 |
| corporation to be
dissolved if the purchase is not | 5 |
| completed in accordance with the
terms of the purchase | 6 |
| order.
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| The purchase ordered pursuant to this subsection (e) shall
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| be consummated within 20 days after the date the order becomes
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| final unless before that time the corporation files with the
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| court a notice of its intention to dissolve and articles of
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| dissolution are properly filed with the Secretary of State | 12 |
| within
50 days after filing the notice with the court.
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| After the purchase order is entered and before the
purchase | 14 |
| price is fully paid, any party may petition the court to
modify | 15 |
| the terms of the purchase and the court may do so if it
finds | 16 |
| that such changes are equitable.
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| Unless the purchase order is modified by the court, the
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| selling shareholder shall have no further rights as a | 19 |
| shareholder
from the date the seller delivers all of his or her | 20 |
| shares to the
purchaser or such other date specified by the | 21 |
| court.
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| If the court orders shares to be purchased by one or
more | 23 |
| other shareholders, in allocating the shares to be purchased
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| the other shareholders, unless equity requires otherwise, the
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| court shall attempt to preserve the existing distribution of
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| voting rights and other designations, preferences,
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| qualifications, limitations, restrictions and special or | 28 |
| relative
rights among the holders of the class or classes and | 29 |
| may direct
that holders of a specific class or classes shall | 30 |
| not participate
in the purchase.
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| (f) When the relief requested by the petition includes the | 32 |
| purchase of the petitioner's shares, then at
At any time within | 33 |
| 90 days after the filing of the
petition under this Section, or | 34 |
| at such time determined by the
court to be equitable, the | 35 |
| corporation or one or more
shareholders may elect to purchase | 36 |
| all, but not less than all, of
the shares owned by the |
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| petitioning shareholder for their fair
value. An election | 2 |
| pursuant to this Section shall state in
writing the amount | 3 |
| which the electing party will pay for the
shares.
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| (1) The election shall be irrevocable unless the court
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| determines that it is equitable to set aside or modify the
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| election.
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| (2) If the election to purchase is filed by one or
more | 8 |
| shareholders, the corporation shall, within 10 days
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| thereafter, give written notice to all shareholders. The | 10 |
| notice
must state: (i) the name and number of shares owned | 11 |
| by the
petitioner; (ii) the name and number of shares owned | 12 |
| by each
electing shareholder; and (iii) the amount which | 13 |
| each electing
party will pay for the shares and must advise | 14 |
| the recipients of
their right to join in the election to | 15 |
| purchase shares.
Shareholders who wish to participate must | 16 |
| file notice of their
intention to join in a purchase no | 17 |
| later than 30 days after the
date of the notice to them or | 18 |
| at such time as the court in its
discretion may allow. All | 19 |
| shareholders who have filed an
election or notice of their | 20 |
| intention to participate in the
election to purchase | 21 |
| thereby become parties to the proceeding and
shall | 22 |
| participate in the purchase in proportion to their
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| ownership of shares as of the date the first election was | 24 |
| filed,
unless they otherwise agree or the court otherwise | 25 |
| directs.
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| (3) The court in its discretion may allow the
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| corporation and all non-petitioning shareholders to file | 28 |
| an
election to purchase the petitioning shareholder's | 29 |
| shares at a
higher price. If the court does so, it shall | 30 |
| allow other
shareholders an opportunity to join in the | 31 |
| purchase at the higher
price in accordance with their | 32 |
| proportionate ownership interest.
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| (4) After an election has been filed by the
corporation | 34 |
| or one or more shareholders, the proceeding filed
under | 35 |
| this Section may not be discontinued or settled, nor may
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| the petitioning shareholder sell or otherwise dispose of |
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| his or
her shares, unless the court determines that it | 2 |
| would be
equitable to the corporation and the shareholders, | 3 |
| other than the
petitioner, to permit the discontinuance, | 4 |
| settlement, sale, or
other disposition. In considering | 5 |
| whether equity exists to
approve any settlement, the court | 6 |
| may take into consideration the
reasonable expectations of | 7 |
| the shareholders as set forth in
subsection (d), including | 8 |
| any existing agreement among the
shareholders.
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| (5) If, within 30 days of the filing of the latest
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| election allowed by the court, the parties reach agreement | 11 |
| as to
the fair value and terms of purchase of the | 12 |
| petitioner's shares,
the court shall enter an order | 13 |
| directing the purchase of
petitioner's shares upon the | 14 |
| terms and conditions agreed to by
the parties.
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| (6) If the parties are unable to reach an agreement as
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| provided for in paragraph (5) of this subsection (f), the | 17 |
| court,
upon application of any party, shall stay the
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| proceeding under subsection (a) and shall determine the | 19 |
| fair value of the
petitioner's
shares pursuant to | 20 |
| subsection (e) as of the day before the date
on which the | 21 |
| petition under subsection (a) was filed or as of
such other | 22 |
| date as the court deems appropriate under the
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| circumstances.
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| (g) In any proceeding under this Section, the court shall
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| allow reasonable compensation to the custodian, provisional
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| director, appraiser, or other such person appointed by the | 27 |
| court
for services rendered and reimbursement or direct payment | 28 |
| of
reasonable costs and expenses, which amounts shall be paid | 29 |
| by the
corporation.
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| (Source: P.A. 89-169, eff. 7-19-95; 89-364, eff. 8-18-95; | 31 |
| 89-626, eff.
8-9-96.)
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| Section 99. Effective date. This Act takes effect July 1, | 33 |
| 2005.
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