Chicago Business Litigation Lawyer Blog
Recent Illinois law regarding the defense of officers and directors of corporations and LLCs encompasses several key factors:
1. Fiduciary Duties: Officers and directors of corporations and LLCs are fiduciaries, holding duties of good faith, loyalty, and honesty to the corporation. They are not permitted to enhance their personal interests at the expense of the corporation’s interests, and should not be in a position where their own individual interests might interfere with their duties to the corporation.
2. Business Judgment Rule: Under the business judgment rule, a presumption exists that corporate decisions made by an officer or director are made on an informed basis and with an honest belief that the action was in the corporation’s best interests. This presumption can be rebutted by allegations that a director acted fraudulently, illegally, or without sufficient information to make an independent business decision [3].
3. Contractual Obligations: Illinois law provides officers of a corporation with a qualified privilege against liability for tortious interference with a contract with the corporation. To overcome this privilege, the plaintiff must assert and plead that the corporate officers acted with malice and without justification.
4. Piercing the Corporate Veil: Generally, corporate officers and directors are not personally liable for the corporation’s actions, as corporations are considered distinct legal entities separate from their officers, shareholders, and directors. However, under certain circumstances, the corporate veil can be pierced to hold officers and directors personally responsible, such as when there is such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist, or adherence to the fiction of separate corporate existence would sanction fraud or promote injustice.
5. Specifics for LLCs: In the context of LLCs, allegations that officers and directors disguised equity contributions as loans, enabling the company to make interest payments to insiders during a time when the company was either insolvent or undercapitalized, could be sufficient to state a claim for breach of fiduciary duty under Illinois law.
These principles form the foundation of a defense for corporate officers and directors in Illinois. Continue reading ›