Businesses frequently enter into agreements in order to ensure that they can provide goods or services to customers or clients in a timely manner. Unfortunately, disputes over these agreements are quite common and may threaten the financial well-being of an entity if it does not have capable legal counsel. Commercial litigation often arises due to a breach of an agreement. There may be a breach of the explicit terms of a contract, or there may be a breach of a fiduciary duty that arises out of a special relationship. Other lawsuits arise out of business torts, such as interference with contracts. At the Voelker Litigation Group, our business litigation attorneys have decades of combined experience helping businesses in Chicago and the surrounding area pursue favorable results in commercial disputes.Protecting Your Entity during Commercial Litigation
Shareholder agreements, partnership agreements, LLC membership agreements, or contracts for goods or services all can give rise to litigation. For example, shareholders of closely held corporations and limited liability companies often enter into Shareholder Agreements that are designed to help the owners handle a wide range of issues that arise during the life of the business. Through these agreements, shareholders can contract among themselves to cover certain business events and contingencies, and Illinois courts generally uphold what the parties have agreed.
However, there are certain limits to the freedom of shareholders. Under Illinois law, shareholders are required to treat each other with the utmost fairness and honesty in corporate affairs. Secret dealing is prohibited. Moreover, minority shareholders in Illinois are given special protection in case majority shareholders act in an oppressive or unlawful manner.
Abusive or oppressive actions can include denying a minority shareholder the right to inspect records, increasing spending to defer profits, choosing not to declare dividends, terminating the employment of a minority shareholder, or freezing out the minority shareholder and issuing additional stock to dilute a minority shareholder interest. Under the Illinois Business Corporation Act, a buyout is permitted if a minority shareholder sues the majority shareholder for oppression, fraud, oppression, waste, or failure of corporate purpose.
Similarly, a buyout can be ordered when a member is dissociated with a limited liability company (LLC) under the Illinois Limited Liability Company Act. This law was originally designed to allow an LLC to have more partnership than corporate characteristics for tax reasons. New amendments have modified the Limited Liability Company Act in various ways. For example, certain amendments provide an expanded set of fiduciary duties and require that management and distribution is per capita unless an operating agreement specifies otherwise. Operating agreements can specify that certain activities are not violations of fiduciary duty.
While members of a manager-member LLC can dissociate only as provided by the operating agreement, members of a member-managed LLC have the right to dissociate, even if they are in breach of an operating agreement. The member's right to participate in management terminates after dissociation.
In some cases, one member can sue to force another member's dissociation if it is no longer practicable to conduct business with the member. For example, when one member of an LLC competes with the LLC, another member may no longer find it appropriate to do business with that member, and he or she can sue to dissociate the member.Discuss a Business Dispute with a Chicago Attorney
It is a sound business decision to consult with a knowledgeable litigator when a dispute arises. At the Voelker Litigation Group, our lawyers represent businesses faced with shareholder disputes and other forms of commercial litigation in Chicago and across Cook County. Call us at 312-870-5430 or contact us via our online form. We represent clients in Winnetka, Berwyn, Des Plaines, and Hoffman Estates, as well as in Aurora, Naperville, and other communities throughout DuPage, Kane, and Will Counties. Our firm also has handled cases in other states, including California, Florida, Delaware, and Wisconsin.