Illinois businesses—whether structured as corporations, partnerships, or limited liability companies (LLCs)—must maintain accurate and accessible records. Stakeholders, including shareholders, partners, and members, have the right to request access to these records for review and verification. Access to a company’s books and records is an essential right for shareholders, members, or partners; this access allows you to verify that you’ve received your share of distributions from the business and to understand how the business is performing while ensuring that others aren’t engaging in unethical behavior, such as stealing from the business or self-dealing.
Several Illinois statutes govern these rights, including 805 ILCS 5/7.75 (Illinois’ Business Corporations Act), 805 ILCS 206/403 (Illinois’ Uniform Partnership Act), and 805 ILCS 180/10-15 (Illinois’ LLC Act). Below is a brief overview of each. In addition to the below, the owner agreement (e.g., Shareholder Agreement, Member Agreement, Partnership Agreement, Operating Agreement, etc.) typically addresses the requirements for the business to keep records.
Shareholder Access to Corporate Records (805 ILCS 5/7.75)
Under the Illinois Business Corporation Act, shareholders of a corporation have the right to inspect corporate books and records. Illinois corporations must keep correct and complete books and records, including financials and records of shareholder meetings and board of director meetings. This statute ensures transparency and accountability by allowing shareholders to examine documents such as meeting minutes, financial statements, and stock records. However, the statute imposes certain conditions, including:
- The request must be made in good faith and for a proper purpose.
- The records sought must be directly related to that purpose.
If you make a books and records demand and the company fails to comply or produce sufficient books and records, you can take legal action, including court orders compelling disclosure.
Partner Access Partnership Records (805 ILCS 206/403)
The Uniform Partnership Act (805 ILCS 206/403) governs access to books and records for partnerships. This statute grants partners the right to inspect and copy partnership records during regular business hours. It emphasizes that partners have fiduciary obligations to each other and must maintain transparency in financial and operational matters. Key aspects of this statute include:
- Each partner is entitled to access the books and records of the partnership.
- A partnership must keep its records at its principal place of business.
- Any partner may request copies of records, with reasonable costs for reproduction being permissible.
LLC Members' Rights to Records (805 ILCS 180/10-15)
Members of an LLC also have the right to inspect company records under the Illinois Limited Liability Company Act, specifically 805 ILCS 180/10-15. This provision ensures that LLC members can access essential company documents, such as financial statements, membership lists, and agreements. Under this statute:
- Members are entitled to inspect and copy records during normal business hours.
- The LLC must provide access to certain mandatory records, including tax returns and financial statements.
- The request must be for a proper purpose related to the member’s interest in the company.
Non-compliance with a valid request may lead to legal consequences, including potential litigation and court-imposed remedies.
Conclusion
Information is power. Understanding books and records requests under Illinois law is essential for business owners and stakeholders alike. Whether dealing with corporations, partnerships, or LLCs, ensuring compliance with statutes such as 805 ILCS 5/7.75, 805 ILCS 206/403, and 805 ILCS 180/10-15 can help maintain transparency and mitigate disputes. If you make an appropriate business records request and the business is unclear in their response, they may be hiding something they don’t want you to know. We have assisted many clients in these types of situations. Be thoughtful and precise in your requests for records and articulate a good reason for your review. If you need assistance with this type of situation, contact us.