Corporate Oppression and Freeze Outs under the Illinois Business Corporation Act (‘BCA’)

Corporate oppression is a term used to describe certain actions or behaviors of directors, shareholders, and officers of a corporation that unfairly prejudice the interest of minority shareholders or stakeholders of the company. In the state of Illinois, minority shareholders or stakeholders may be protected under the Illinois Business Corporation Act (BCA) against such oppression.

Freeze-out is another type of corporate oppression where the majority shareholder may enact powers or take steps to force out minority shareholders from the company. The freeze-out is enforced to such an extent that it effects the operations and interests of the other stakeholders. Since the freeze-out results in financially affecting the minority shareholders, it is often deemed illegal.

The Illinois BCA provides relief for minority shareholders in such situations, as they may in certain circumstances, file a lawsuit against the corporation for breach of fiduciary duty under the Act.

One area in which minority shareholders may be protected under the Illinois BCA is in the context of oppressive conduct. Examples of oppressive conduct include acts such as excessive executive compensation or withholding of important information regarding corporate decision-making, sharing of profits and more substantial administrative decisions which affect corporate interests. However, it is essential to note that this Act and its protection are not merely limited to the shareholders and stakeholder, it encompasses the board of members, directors, and corporate officers.

If a minority shareholder believes that the corporation has engaged in oppressive conduct, they may file a lawsuit in an Illinois court. If the court finds that the minority shareholder has been subjected to oppression by the majority shareholder or other stakeholders, relief may be granted in the form of an equitable remedy. This could involve the reversal of decisions or force the correct stakeholders to gain the stake at a judicious price.

In conclusion, corporate oppression and freeze-out undermine the principles of equity, corporate governance and can inconvenience the minorities involved. As per the Illinois BCA, the conduct and interests of the corporation should be lawful, equitable, transparent, and not biased towards any member or stakeholder. Therefore it is extremely crucial for the management of corporations in Illinois to remain vigilant in their professional practices and ensure that all corporate decisions and actions are consistent with the mandate of the law.

If you are a victim of corporate oppression or a squeeze out in either a corporation, LLC or limited partnership, please call our Chicago corporate oppression attorneys for a free consultation at 630-333-0333.