Dissolution And Dissociation

  1. Law
  2. Illinois Compiled Statutes
  3. BUSINESS ORGANIZATIONS
  4. Limited Liability Company Act.
  5. Dissolution And Dissociation

Checkout our iOS App for a better way to browser and research.

(805 ILCS 180/Art. 35 heading)

Article 35. Dissolution and Dissociation

 

(805 ILCS 180/35-1)

Sec. 35-1. Events causing dissolution and winding up of company's business.

(a) A limited liability company is dissolved and its business must be wound up upon the occurrence of any of the following events:

  • (1) An event or circumstance that causes the dissolution of a company by the express terms of the operating agreement.
  • (2) The consent of all members.
  • (3) The passage of 180 consecutive days during which the company has no members.
  • (4) On application by a member or a dissociated member, upon entry of a judicial decree that:
    • (A) the economic purpose of the company has been or is likely to be unreasonably frustrated;
    • (B) the conduct of all or substantially all of the company's activities is unlawful;
    • (C) it is not otherwise reasonably practicable to carry on the company's business in conformity with the articles of organization and the operating agreement.
  • (5) On application by a member or transferee of a distributional interest, upon entry of a judicial decree that the managers or those members in control of the company:
    • (A) have acted, are acting, or will act in a manner that is illegal or fraudulent; or
    • (B) have acted or are acting in a manner that is oppressive and was, is, or will be directly harmful to the applicant.
  • (6) Administrative dissolution under Section 35-25.

(b) In a proceeding under subdivision (4) or (5) of subsection (a), the court may order a remedy other than dissolution including, but not limited to, a buyout of the applicant's distributional interest.

(Source: P.A. 101-553, eff. 1-1-20.)

 

(805 ILCS 180/35-3)

Sec. 35-3. Limited liability company continues after dissolution.

(a) Subject to subsections (b), (c), and (d) of this Section, a limited liability company continues after dissolution only for the purpose of winding up its business.

(b) At any time after the dissolution of a limited liability company and before the winding up of its business is completed, the members, including a dissociated member whose dissociation caused the dissolution, may unanimously waive the right to have the company's business wound up and the company terminated. In that case:

  • (1) the limited liability company resumes carrying on its business as if dissolution had never occurred, and any liability incurred by the company or a member after the dissolution and before the waiver is determined as if the dissolution had never occurred; and
  • (2) the rights of a third party accruing under subsection (a) of Section 35-7 or arising out of conduct in reliance on the dissolution before the third party knew or received a notification of the waiver are not adversely affected.

(c) If there are no members, the legal representative of the last remaining member may, within one year after the occurrence of the event that caused the dissociation of the last remaining member, agree in writing to continue the limited liability company. In that event, the legal representative or its nominee or designee will be admitted to the company as a member and the company will not be dissolved or its business wound up until the occurrence of a future event of dissolution, if any.

(d) This Section does not apply in the case of a dissolution described in subdivision (4), (5), or (6) of Section 35-1.

(Source: P.A. 98-720, eff. 7-16-14; 99-637, eff. 7-1-17.)

 

(805 ILCS 180/35-4)

Sec. 35-4. Wind up of limited liability company's business.

(a) After dissolution, a member who has not wrongfully dissociated may participate in winding up a limited liability company's business.

(b) If a dissolved limited liability company has no members, the legal representative of the last person to have been a member may wind up the business of the company. If the person does so, the person has the powers of a sole manager under subsection (b) of Section 15-1 and is deemed to be a manager for the purposes of subsection (a) of Section 10-10.

(c) A person winding up a limited liability company's business (1) may preserve the company's business or property as a going concern for a reasonable time, prosecute and defend actions and proceedings, whether civil, criminal, or administrative, dispose of and transfer the company's property, settle disputes by mediation or arbitration, and perform other acts necessary or appropriate to winding up and (2) shall discharge the company's debts, obligations, or other liabilities, settle and close the company's business and marshal and distribute the assets of the company pursuant to Section 35-10.

(d) If the legal representative under subsection (b) declines or fails to wind up the company's business, a person may be appointed to do so by the consent of transferees owning a majority of the rights to receive distributions as transferees at the time the consent is to be effective. A person appointed under this subsection:

  • (1) has the powers of a sole manager under subsection (b) of Section 15-1 and is deemed to be a manager for the purposes of subsection (a) of Section 10-10; and
  • (2) shall promptly deliver to the Secretary of State for filing an amendment to the company's articles of organization to:
    • (A) state that the company has no members;
    • (B) state that the person has been appointed pursuant to this subsection to wind up the company; and
    • (C) provide the mailing addresses of the person.

(e) The circuit court may order judicial supervision of the winding up of a dissolved limited liability company, including the appointment of a person to wind up the company's business:

  • (1) on application of a member, if the applicant establishes good cause;
  • (2) on the application of a transferee, if:
    • (A) the company does not have any members;
    • (B) the legal representative of the last person to have been a member declines or fails to wind up the company's business; and
    • (C) within a reasonable time following the dissolution a person has not been appointed pursuant to subsection (d); or
  • (3) in connection with a proceeding under subdivision (4) of subsection (a) of Section 35-1. (Source: P.A. 99-637, eff. 7-1-17.)

 

(805 ILCS 180/35-5)

Sec. 35-5. (Repealed).

(Source: P.A. 87-1062. Repealed by P.A. 90-424, eff. 1-1-98.)

 

(805 ILCS 180/35-7)

Sec. 35-7. Member or manager's power and liability as agent after dissolution.

(a) A limited liability company is bound by a member or manager's act after dissolution that:

  • (1) is appropriate for winding up the company's business; or
  • (2) would have bound the company before dissolution, if the other party to the transaction did not have notice of the dissolution.

(b) A member or manager who, with knowledge of the dissolution, subjects a limited liability company to liability by an act that is not appropriate for winding up the company's business is liable to the company for any damage caused to the company arising from the liability.

(Source: P.A. 99-637, eff. 7-1-17.)

 

(805 ILCS 180/35-10)

Sec. 35-10. Distribution of assets in winding up limited liability company's business.

(a) In winding up a limited liability company's business, the assets of the company must be applied to discharge its obligations to creditors, including members who are creditors. Any surplus must be applied to pay in money the net amount distributable to members in accordance with their right to distributions under subsection (b) of this Section.

(b) Each member is entitled to a distribution upon the winding up of the limited liability company's business, consisting of a return of all contributions that have not previously been returned and a distribution of any remainder in equal shares.

(Source: P.A. 90-424, eff. 1-1-98.)

 

(805 ILCS 180/35-15)

Sec. 35-15. Statement of termination. When a limited liability company has been wound up, a statement of termination shall be executed in duplicate in the manner prescribed in Section 5-45 and shall set forth all of the following:

  • (1) The name of the limited liability company;
  • (2) A post office address to which may be mailed a copy of any process against the company that may be served upon the Secretary of State; and
  • (3) A statement that the limited liability company has been terminated.

(Source: P.A. 99-637, eff. 7-1-17.)

 

(805 ILCS 180/35-20)

Sec. 35-20. Filing of statement of termination.

(a) Duplicate originals of the statement of termination shall be delivered to the Secretary of State. If the Secretary of State finds that the statement of termination conforms to law, he or she shall, when all required fees have been paid:

  • (1) endorse on each duplicate original the word "Filed" and the date of the filing thereof; and
  • (2) file one duplicate original in his or her office.

(b) A duplicate original of the statement of termination shall be returned to the representative of the dissolved limited liability company. Upon the filing of a statement of termination, the existence of the company shall terminate, and its articles of organization shall be deemed cancelled, except for the purpose of suits, other proceedings, and appropriate action as provided in this Article. The manager or managers or member or members at the time of termination, or those that remain, shall thereafter be trustee for the members and creditors of the terminated company and, in that capacity, shall have authority to convey or distribute any company property discovered after termination and take any other action that may be necessary on behalf of and in the name of the terminated company.

(Source: P.A. 99-637, eff. 7-1-17.)

 

(805 ILCS 180/35-22)

Sec. 35-22. Revocation of termination.

(a) A limited liability company may revoke its termination within 90 days after the effective date of termination if the limited liability company has not begun to distribute its assets or has not commenced a proceeding for court supervision of its winding up under Section 35-4.

(b) The limited liability company members or managers may revoke the termination if a majority of members or managers, respectively, approve the revocation.

(c) Within 90 days after the termination has been revoked by the limited liability company, articles of revocation of termination shall be executed and filed in duplicate in accordance with Section 5-45 and shall set forth:

  • (1) The name of the limited liability company.
  • (2) The effective date of the termination that was revoked.
  • (3) A statement that the limited liability company has not begun to distribute its assets nor has it commenced a proceeding for court supervision of its winding up.
  • (4) The date the revocation of termination was authorized.
  • (5) A statement that the limited liability company members or managers revoked the termination.

(d) When the provisions of this Section have been complied with, the Secretary of State shall endorse the word "Filed" on the duplicate copy of the articles of revocation of termination. Failure of the limited liability company to file the articles of revocation of termination within the time period required in subsection (c) shall not be grounds for the Secretary of State to reject the filing, but the limited liability company filing beyond the time period shall pay a penalty as prescribed by this Act.

(e) The revocation of termination is effective on the date of filing thereof by the Secretary of State and shall relate back and take effect as of the date of termination and the limited liability company may resume carrying on business as if termination had never occurred.

(Source: P.A. 102-282, eff. 1-1-22.)

 

(805 ILCS 180/35-25)

Sec. 35-25. Grounds for administrative dissolution. The Secretary of State may dissolve any limited liability company administratively if:

  • (1) it has failed to file its annual report and pay its fee as required by this Act before the first day of the anniversary month or has failed to pay any fees, penalties, or charges required by this Act;
  • (2) it has failed to file in the Office of the Secretary of State any report after the expiration of the period prescribed in this Act for filing the report;
  • (2.5) it has misrepresented any material matter in any application, report, affidavit, or other document submitted by the limited liability company under this Act;
  • (3) it has failed to appoint and maintain a registered agent in Illinois in accordance with the provisions of this Act;
  • (4) a manager or member to whom interrogatories have been propounded by the Secretary of State as provided in Section 5-60 of this Act fails to answer the interrogatories fully and to timely file the answer in the office of the Secretary of State; or
  • (5) it has tendered payment to the Secretary of State which is returned due to insufficient funds, a closed account, or for any other reason, and acceptable payment has not been subsequently tendered. (Source: P.A. 98-171, eff. 8-5-13; 99-608, eff. 7-22-16.)

 

(805 ILCS 180/35-30)

Sec. 35-30. Procedure for administrative dissolution.

(a) After the Secretary of State determines that one or more grounds exist under Section 35-25 for the administrative dissolution of a limited liability company, the Secretary of State shall send a notice of delinquency by regular mail to each delinquent limited liability company at its registered office or, if the limited liability company has failed to maintain a registered office, then to the last known address shown on the records of the Secretary of State for the principal place of business of the limited liability company.

(b) If the limited liability company does not correct the default described in paragraphs (1) or (2) of Section 35-25 within 120 days following the date of the notice of delinquency, the Secretary of State shall thereupon dissolve the limited liability company by issuing a certificate of dissolution that recites the grounds for dissolution and its effective date. If the limited liability company does not correct the default described in paragraphs (2.5), (3), (4), or (5) of Section 35-25 within 60 days following the notice, the Secretary of State shall dissolve the limited liability company by issuing a certificate of dissolution that recites the grounds for dissolution and its effective date. The Secretary of State shall file the original of the certificate in his or her office and mail one copy to the limited liability company at its registered office or, if the limited liability company has failed to maintain a registered office, then to the last known address shown on the records of the Secretary of State for the principal place of business of the limited liability company.

(c) Upon the administrative dissolution of a limited liability company, a dissolved limited liability company shall continue for only the purpose of winding up its business. A dissolved limited liability company may take all action authorized under Section 1-30 or otherwise necessary or appropriate to wind up its business and affairs and terminate.

(d) The Secretary of State shall, from information received from the Illinois Commerce Commission, compile and keep a list of all domestic limited liability companies that are regulated pursuant to the provisions of the Public Utilities Act, or the Collateral Recovery Act, or the Personal Property Storage Act, or Chapter 18a, 18c, or 18d of the Illinois Vehicle Code and which hold, as a prerequisite for doing business in this State, any franchise, license, permit, or right to engage in any business regulated by such Acts.

(e) Each month the Secretary of State shall, by written notice, advise the Chief Clerk of the Illinois Commerce Commission of any domestic limited liability company on the list maintained under subsection (d) that has been dissolved within the month.

(f) The Secretary of State and the Illinois Commerce Commission may provide each other the information required under this Section in an electronic format, including, without limitation by means of such agreed access, those records of the Secretary of State that will provide the Illinois Commerce Commission the information it requires under the statutes it administers. The provision of information under this Section shall begin as soon as is practicable, but in no event later than October 1, 2020.

(Source: P.A. 101-494, eff. 1-1-20.)

 

(805 ILCS 180/35-35)

Sec. 35-35. (Repealed).

(Source: P.A. 87-1062. Repealed by P.A. 90-424, eff. 1-1-98.)

 

(805 ILCS 180/35-37)

Sec. 35-37. Administrative dissolution; limited liability company name. The Secretary of State shall not allow another limited liability company or corporation to use the name of a domestic limited liability company that has been administratively dissolved until 3 years have elapsed following the date of issuance of the notice of dissolution. If the domestic limited liability company that has been administratively dissolved is reinstated within 3 years after the date of issuance of the notice of dissolution, the domestic limited liability company shall continue under its previous name unless the limited liability company changes its name upon reinstatement.

(Source: P.A. 99-637, eff. 7-1-17.)

 

(805 ILCS 180/35-40)

Sec. 35-40. Reinstatement following administrative dissolution.

(a) A limited liability company administratively dissolved under Section 35-25 may be reinstated by the Secretary of State following the date of issuance of the notice of dissolution upon:

  • (1) The filing of an application for reinstatement.
  • (2) The filing with the Secretary of State by the limited liability company of all reports then due and theretofore becoming due.
  • (3) The payment to the Secretary of State by the limited liability company of all fees and penalties then due and theretofore becoming due.

(b) The application for reinstatement shall be executed and filed in duplicate in accordance with Section 5-45 of this Act and shall set forth all of the following:

  • (1) The name of the limited liability company at the time of the issuance of the notice of dissolution.
  • (2) If the name is not available for use as determined by the Secretary of State at the time of filing the application for reinstatement, the name of the limited liability company as changed, provided that any change of name is properly effected under Section 1-10 and Section 5-25 of this Act.
  • (3) The date of issuance of the notice of dissolution.
  • (4) The address, including street and number or rural route number of the registered office of the limited liability company upon reinstatement thereof and the name of its registered agent at that address upon the reinstatement of the limited liability company, provided that any change from either the registered office or the registered agent at the time of dissolution is properly reported under Section 1-35 of this Act.

(c) When a dissolved limited liability company has complied with the provisions of the Section, the Secretary of State shall file the application for reinstatement.

(d) Upon the filing of the application for reinstatement, the limited liability company existence shall be deemed to have continued without interruption from the date of the issuance of the notice of dissolution, and the limited liability company shall stand revived with the powers, duties, and obligations as if it had not been dissolved; and all acts and proceedings of its members, managers, officers, employees, and agents, acting or purporting to act in that capacity, and which would have been legal and valid but for the dissolution, shall stand ratified and confirmed.

(e) Without limiting the generality of subsection (d), upon the filing of the application for reinstatement, no member, manager, or officer shall be personally liable for the debts and liabilities of the limited liability company incurred during the period of administrative dissolution by reason of the fact that the limited liability company was administratively dissolved at the time the debts or liabilities were incurred.

(Source: P.A. 98-776, eff. 1-1-15; 99-78, eff. 7-20-15.)

 

(805 ILCS 180/35-45)

Sec. 35-45. Events causing member's dissociation. A member is dissociated from a limited liability company upon the occurrence of any of the following events:

  • (1) The company's having notice of the member's express will to dissociate upon the date of notice or on a later date specified by the member.
  • (2) An event agreed to in the operating agreement as causing the member's dissociation.
  • (3) Upon transfer of all of a member's distributional interest, other than a transfer for security purposes or a court order charging the member's distributional interest that has not been foreclosed.
  • (4) The member's expulsion pursuant to the operating agreement.
  • (5) The member's expulsion by unanimous vote of the other members if:
    • (A) it is unlawful to carry on the company's business with the member;
    • (B) there has been a transfer of substantially all of the member's distributional interest, other than a transfer for security purposes or a court order charging the member's distributional interest that has not been foreclosed;
    • (C) within 90 days after the company notifies a corporate member that it will be expelled because it has filed a certificate of dissolution or the equivalent, its charter has been revoked, or its right to conduct business has been suspended by the jurisdiction of its incorporation, the member fails to obtain a revocation of the certificate of dissolution or a reinstatement of its charter or its right to conduct business; or
    • (D) a partnership or a limited liability company that is a member has been dissolved and its business is being wound up.
  • (6) On application by the company or another member, the member's expulsion by judicial determination because the member:
    • (A) engaged in wrongful conduct that adversely and materially affected the company's business;
    • (B) willfully or persistently committed a material breach of the operating agreement or of a duty owed to the company or the other members under Section 15-3; or
    • (C) engaged in conduct relating to the company's business that makes it not reasonably practicable to carry on the business with the member.
  • (7) The member's:
    • (A) becoming a debtor in bankruptcy;
    • (B) executing an assignment for the benefit of creditors;
    • (C) seeking, consenting to, or acquiescing in the appointment of a trustee, receiver, or liquidator of the member or of all or substantially all of the member's property; or
    • (D) failing, within 90 days after the appointment, to have vacated or stayed the appointment of a trustee, receiver, or liquidator of the member or of all or substantially all of the member's property obtained without the member's consent or acquiescence, or failing within 90 days after the expiration of a stay to have the appointment vacated.
  • (8) In the case of a member who is an individual:
    • (A) the member's death;
    • (B) the appointment of a guardian or general conservator for the member; or
    • (C) a judicial determination that the member has otherwise become incapable of performing the member's duties under the operating agreement.
  • (9) In the case of a member that is a trust or is acting as a member by virtue of being a trustee of a trust, distribution of the trust's entire rights to receive distributions from the company, but not merely by reason of the substitution of a successor trustee.
  • (10) In the case of a member that is an estate or is acting as a member by virtue of being a personal representative of an estate, distribution of the estate's entire rights to receive distributions from the company, but not merely the substitution of a successor personal representative.
  • (11) Termination of the existence of a member if the member is not an individual, estate, or trust other than a business trust.
  • (12) In the case of a company that participates in a merger under Article 37, if:
    • (A) the company is not the surviving entity; or
    • (B) otherwise as a result of the merger, the person ceases to be a member.
  • (13) The company participates in a conversion under the Entity Omnibus Act.
  • (14) The company participates in a domestication under the Entity Omnibus Act, if, as a result, the person ceases to be a member. (Source: P.A. 100-561, eff. 7-1-18; 101-553, eff. 1-1-20.)

 

(805 ILCS 180/35-50)

Sec. 35-50. Member's power to dissociate; wrongful dissociation.

(a) A member of a member-managed company has the power to dissociate from a company at any time, rightfully or wrongfully, by express will under subdivision (1) of Section 35-45. If an operating agreement does not specify in writing the time or the events upon the happening of which a member of a manager-managed company may dissociate, a member does not have the power, rightfully or wrongfully, to dissociate from the company before the dissolution and winding up of the company.

(b) The member's dissociation from a member-managed company is wrongful only if it is in breach of an express provision of the agreement.

(c) A member who wrongfully dissociates from a member-managed company is liable to the company and to the other members for damages caused by the dissociation. The liability is in addition to any other obligation of the member to the company or to the other members.

(d) If a member-managed company does not dissolve and wind up its business as a result of a member's wrongful dissociation under subsection (b) of this Section, damages sustained by the company for the wrongful dissociation must be offset against distributions otherwise due the member after the dissociation.

(e) Unless otherwise provided in writing in an agreement, a company whose original articles of organization were filed with the Secretary of State and effective on or before January 1, 2001, shall continue to be governed by this Section in effect immediately prior to January 1, 2001, and shall not be governed by this Section.

(Source: P.A. 92-33, eff. 7-1-01.)

 

(805 ILCS 180/35-55)

Sec. 35-55. Effect of member's dissociation.

(a) Upon a member's dissociation from a limited liability company:

  • (1) the member's right to participate in the management and conduct of the company's business terminates, except as otherwise provided in Section 35-4, and the member ceases to be a member and is treated the same as a transferee of a member;
  • (2) the member's fiduciary duties terminate, except as provided in subdivision (3) of this subsection (a);
  • (3) the member's duty of loyalty under subdivisions (1) and (2) of subsection (b) of Section 15-3 and duty of care under subsection (c) of Section 15-3 continue only with regard to matters arising and events occurring before the member's dissociation, unless the member participates in winding up the company's business pursuant to Section 35-4; and
  • (4) subject to Section 30-25 and Article 37, any distributional interest owned by the person immediately before dissociation in the person's capacity as a member is owned by the person solely as a transferee.

(b) A person's dissociation as a member of a limited liability company does not of itself discharge the person from any debt, obligation, or other liability to the company or the other members which the person incurred while a member.

(Source: P.A. 99-637, eff. 7-1-17.)

 

(805 ILCS 180/35-60)

Sec. 35-60. (Repealed).

(Source: P.A. 90-424, eff. 1-1-98. Repealed by P.A. 99-637, eff. 7-1-17.)

 

(805 ILCS 180/35-65)

Sec. 35-65. (Repealed).

(Source: P.A. 90-424, eff. 1-1-98. Repealed by P.A. 99-637, eff. 7-1-17.)

 

(805 ILCS 180/35-70)

Sec. 35-70. (Repealed).

(Source: P.A. 91-354, eff. 1-1-00. Repealed by P.A. 99-637, eff. 7-1-17.)


Download our app to see the most-to-date content.