Key Points in Illinois Law for Officers and Directors of Corporations or LLCs
In Illinois, officers and directors of corporations and LLCs are generally protected from personal liability for their decisions, as long as these decisions are made on behalf of the corporation or LLC. This protection extends to instances where officers, directors, and shareholders interfere with the company's contract for the company's benefit, as their interests are considered sufficiently aligned with those of the company.
However, this protection from personal liability does not extend to actions undertaken solely for the benefit of the officer or director, or actions intended to harm a plaintiff, as these actions would be contrary to the corporation's best interests.
They are considered trustees of the corporation's business and property for the benefit of its shareholders and are expected to act in good faith, with loyalty, and honesty. They must not enhance their personal interests at the expense of the corporation's interests and should not actively exploit their positions within the corporation for their personal benefit. Moreover, they should not hinder the ability of a corporation to continue the business for which it was developed.
Importantly, under Illinois law, a corporation is a separate legal entity from its shareholders, officers, and directors, who are generally not liable for the corporation's debts. The primary purpose of doing business as a corporation is to insulate stockholders from unlimited liability for corporate activity .
However, officers and directors can be held personally liable for a corporation's torts if they actively participate in the tort [6, 7, 9]. They can also be held liable for the corporation's fraud if they knowingly participate or assist in the fraud, or do so recklessly without knowledge . It's important to note that they owe fiduciary duties to the corporation, not to individual shareholders.
In the case of corporations created to manage LLCs, directors owe fiduciary duties of loyalty, good faith, and fair dealing to the LLC if the LLC is the corporation's sole shareholder.
For a breach of fiduciary duty, Illinois law applies the law of the state of incorporation to claims against corporate officers and directors. If an officer or director misappropriates corporate assets or usurps corporate opportunities, the remedy under Illinois law is restitution compelled by means of a constructive trust.
Don't defend your Officer or Director decisions and actions on your own. Let us the Illinois Officer and Director Defense Attorneys at Lubin Austermuehle - The Business Litigators -- be your trusted advisers in protect your company and your role as a board leader or officer. Contact us today for a confidential consultation online or at 630-333-0333.