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Statutory Remedies for Shareholder Oppression under Illinois Law
Illinois law protects minority shareholders in closely held corporations by providing a number of statutory rights and remedies aimed at preventing oppression of minority shareholders. These rights and remedies include: (1) the right to notice and voting at shareholder meetings; (2) the right to inspect a company’s books and records; (3) the right to dissent and receive payment for shares in certain instances; (4) the right to maintain a derivative action; and (5) remedies for breach of fiduciary duty. In the event of shareholder oppression, Illinois law provides various statutory remedies available to minority shareholders.
Before discussing these remedies, it is important to understand what the terms “closely held corporation” and “minority shareholder” mean. A closely held corporation is a company whose shares are not freely transferrable to third parties. Closely held corporations are also referred to sometimes as “closed corporations,” “family corporations,” “unlisted companies,” or “unquoted corporations.” A company’s shares may not be transferrable due to the fact that the corporation’s governing documents restrict stock transfers to third parties or because there is simply no market for sale of the shares (i.e. the shares are not traded on a stock exchange such as the NYSE). This term is also used occasionally to describe limited liability companies, despite the fact that they are not corporations.
A minority shareholder is any shareholder (or member of an LLC) that does not own more than 50% of the company. In companies where no one person owns more than 50% of the company, a minority shareholder is anyone who does not control the operations of or make the decisions for the business.Statutory Remedies for Oppression of Minority Shareholders
Illinois law does not permit majority shareholders to oppress minority shareholders in a closed corporation. While the Illinois Business Corporation Act does not define the term “oppression,” courts have made clear that conduct need not be illegal or fraudulent to be oppressive. If a minority shareholder is being oppressed, the shareholder may request relief from the court and upon a finding of oppression, the court may provide any number of statutory remedies to the oppressed shareholder. These remedies include:
- The performance, prohibition, alteration, or setting aside of any action of the corporation or of its shareholders, directors, or officers of or any other party to the proceedings;
- The cancellation or alteration of any provision in the corporation's articles of incorporation or by-laws;
- The removal from office of any director or officer;
- The appointment of any individual as a director or officer;
- An accounting with respect to any matter in dispute;
- The appointment of a custodian to manage the business and affairs of the corporation to serve for the term and under the conditions prescribed by the court;
- The appointment of a provisional director to serve for the term and under the conditions prescribed by the court;
- The submission of the dispute to mediation or other forms of non-binding alternative dispute resolution;
- The payment of dividends;
- The award of damages to any aggrieved party;
- The purchase by the corporation or one or more other shareholders of all, but not less than all, of the shares of the petitioning shareholder for their fair value and on the terms determined under subsection (e); or
- The dissolution of the corporation.
Our Chicago minority shareholder and LLC member attorneys have litigated minority oppression, business divorce, stolen corporate opportunity and breach of fiduciary duty lawsuits for decades.
Super Lawyers named Chicago and Oak Brook shareholder oppression Peter Lubin and Patrick Austrermuehle a Super Lawyer and Rising Star respectively in the Categories of Class Action, Business Litigation and Consumer Rights Litigation. Lubin Austermuehle’s Oak Brook and Chicago shareholder oppression lawyers have over thirty-five years experience in litigating complex class action, consumer rights and business and commercial litigation disputes. We handle emergency business lawsuits involving injunctions, and TROS, covenant not to compete, franchise, distributor and dealer wrongful termination and trade secret lawsuits and many different kinds of business disputes involving shareholders, partnerships, closely held businesses and employee breaches of fiduciary duty. We also assist businesses and business owners who are victims of fraud.
Lubin Austermuehle’s Wheaton, Naperville, and Oak Brook litigation attorneys have more than thirty-five years of experience helping business clients unravel the complexities of Illinois and out-of-state business laws. Our Chicago business divorce litigation lawyers represent individuals, family businesses and enterprises of all sizes in a variety of legal disputes, including disputes among partners and shareholders as well as lawsuits between businesses and consumer rights, auto fraud, and wage claim individual and class action cases. In every case, our goal is to resolve disputes as quickly and successfully as possible, helping business clients protect their investments and get back to business as usual. From offices near Aurora and Elgin, we serve clients throughout Illinois and the Midwest.
If you’re facing a business or class-action lawsuit, or the possibility of one, and you’d like to discuss how the experienced Illinois shareholder oppression attorneys at Lubin Austermuehle can help, we would like to hear from you. To set up a consultation with one of our Chicago class action attorneys and Chicago business trial lawyers, please call us toll-free at (833) 306-4933 or contact us online.