Illinois Legislation Update

The Illinois General Assembly has passed a number of bills of significance that have been signed by Governor Rauner. Those bills include:

Personal Information Protection Act Amendments: The Personal Information Protection Act has been amended to include online account information such as user names and passwords. Already protected were medical and health information and biometric data. Any entity collecting protected information is required to take reasonable security measures to protect the data from unauthorized disclosure and is subject to reporting requirements if a security breach occurs.

Right to Privacy in School Settings Act Amendments: The amendments forbid elementary or secondary schools from requiring students to provide school officials with passwords to the student’s social media accounts. The amended act does require that if the school is investigating disciplinary policy violations relating to social media use, that the student provide any content requested by the school.

LLC Act Amendments: The Limited Liability Company Act has received significant amendments to allow greater flexibility in the operation of limited liability companies. The amendments include:

Member Management by Default. A limited liability company will be assumed to be member-managed unless the operating agreement states otherwise.

Members and Managers No Longer Agents by Default. The provision of the LLC Act making the members and managers agents—a person able to act on behalf of the company and sign contracts on behalf of the company—automatically has been removed. Now authority to act for the company must be established by some other means. Since a third party may no longer assume that a member or manager has authority to act on behalf of the company, the amendments provide one means to provide proof of authority, by authorizing the filing of a Statement of Authority with the Secretary of State identifying the scope of a person’s power to act on behalf of the company.

Waiver of Fiduciary Duty. The fiduciary duties of members and managers of limited liability companies may be partially waived by “clear and unambiguous” provisions of the company’s operating agreement to a limited extent. Such waivers can be used to do such things as waive conflicts of interest or allow a member or manager to do business with the company. The duties to act in good faith and deal fairly with the company cannot be waived, nor can intentional misconduct or illegal actions be excused.

Treatment of Disassociated Members and Transferees of Membership Interest. The duty of the company to buy-out the membership interest of a disassociated member has been eliminated. If the membership interest of a disassociated member is not bought out, he or she will be treated as a transferee—a person who has acquired an interest in the company but has not been approved as a member of the company. Transferees have been given increased rights to information. Once the amendments take effect, a transferee will have the right to access records that the LLC Act requires that companies keep.

Alternatives to Dissolution. The amendments authorize judges to order actions other than dissolution of the company on petition of a member. Once effective, the amendments will allow judges to order actions such as the buy-out of a member or other measure the judge deems appropriate under the circumstances.

Conversion to or from an LLC. Whether an entity of another type can be converted to an LLC is now determined by the act that entity is organized under rather than the LLC Act. If that act allows the conversion, then it is permitted, rather than only the types specified in the LLC Act as had previously been the case.

If you are a member or manager of an existing LLC you should take the opportunity to review the operating agreement of your LLC and the amendments to the LLC Act with the attorneys at Plager, Krug, Bauer & Rudolph, Ltd. to determine if the amendments to the Act allow changes that would benefit your LLC.

The Low-Speed Vehicle Safety Requirements.

Amendments to the Illinois Vehicle Code now require that the term “low speed vehicles” operated on any public street must have a windshield meeting federal standard, front and rear turn signals, an exterior rear-view mirror on the driver’s side of the vehicle, seat belts, a vehicle identification number, red reflective warning signs on the left, right and center rear of the vehicle, and a parking brake. If the low-speed vehicle is operated on a highway, the owner must have a certificate of title, and current valid registration must be displayed. “Low Speed Vehicles” are defined as, four-wheeled vehicles with a maximum speed between twenty and twenty-five miles per hour that meets federal standards for its class of vehicle.