If you’re a shareholder of a privately held (i.e., not publicly traded) company and your co-
shareholders are excluding you from important decisions, are being uncooperative, are
improperly taking money from the company, or are taking other improper actions, section 12.56
of the Illinois Business Corporations Act (and a lawyer) may be able to help.
Section 12.56 of the Business Corporations Act – Shareholders’ Remedies
Section 12.56 is titled “Shareholder remedies: non-public corporations” and lists remedies
available to shareholders of non-public corporations when (1) the directors of a company are
acting illegally or fraudulently or (2) when the assets of the company are being wasted or
misapplied. If this occurs, you can file a lawsuit and ask the court for various remedies to recoup
what you and the company lost.
The remedies available to the court include—for example—removing officers or directors,
setting aside corporate actions, appointing an officer or director, appointing custodians or
receivers, appointing provisional directors, ordering the payment of dividends, and/or awarding
damages to an aggrieved party.
The court can also order the company to purchase your shares or even order the sale of the entire company. The court has many options to adjudicate claims of shareholder oppression.
A plain reading of the statute tells us that if the directors or other shareholders of your company
have misapplied or wasted assets, acted in an illegal, oppressive manner, or if you are
deadlocked in the management of the business, if you can establish the corporation will be
irreparably harmed without the court intervening, then you have options. This statute does not
limit the remedies the Court can fashion to address the claims raised. If you can establish these
types of circumstances, a court can potentially order a variety of relief to resolve the issue.
A recent Illinois appellate court demonstrates the Court’s discretion to fashion a remedy not
specifically enumerated by the statute in shareholder oppression cases. In Osaghae v. Oasis
Hospice and Palliative Care Inc., 2021 Il App (1 st ) 200515, a shareholder petitioned the Court for relief from being oppressed by the other shareholder. The Court noted that the petitioning shareholder had operated the business since its inception, and the non-petitioning shareholder. was never directly involved in the business. The court required the defendant shareholders to sell their shares to the plaintiff shareholders.
The trial court found a reasonable, just, and creative solution to the problem, and the appellate
court affirmed. Squeezed-out shareholders have remedies in Illinois.
If you have an issue involving this nuanced area of the law consult a law firm that has expertise
in this area. King & Jones has been representing shareholders, members, and partners in closely
held corporate, LLC, and partnership disputes for decades in Illinois and other jurisdictions. Give us a call to discuss your problem.