Chapter 805 - Business Organizations - Business Corporation Act of 1983

(805 ILCS 5/Art. 2A heading)

ARTICLE 2A. CLOSE CORPORATIONS

(805 ILCS 5/2A.05) (from Ch. 32, par. 2A.05)
Sec. 2A.05. Formation of a close corporation. A close corporation shall be formed in accordance with the provisions of this Act, except its articles of incorporation shall contain a heading stating that it is being organized as a close corporation. A corporation organized under the Professional Service Corporation Act or the Medical Service Corporation Act, as such Acts are now or hereafter amended, may become a close corporation if it complies with the requirements of this Article.
(Source: P.A. 88- 151.)

(805 ILCS 5/2A.10) (from Ch. 32, par. 2A.10)
Sec. 2A.10. Election of existing corporation to become a close corporation. Any corporation whose issued and outstanding shares are subject, or upon election shall be subject, to one or more of the restrictions on transfer set forth in Section 6.55 may become a close corporation by executing, filing and recording, in accordance with Sections 1.10 and 10.20 of this Act, articles of amendment of its articles of incorporation which shall contain a statement required by Section 2A.05 to appear in the articles of incorporation of a close corporation. Such amendment shall be adopted in accordance with the requirements of Section 10.20 of this Act, except that, subsection (d) of Section 10.20 notwithstanding, it must be approved unanimously in writing or by the vote of the holders of record of all the outstanding shares of each class of the corporation.
(Source: P.A. 86- 1328.)

(805 ILCS 5/2A.13) (from Ch. 32, par. 2A.13)
Sec. 2A.13. Effect of formation or election. A corporation formed under the provisions of Section 2A.05 or electing to be treated as a close corporation under Section 2A.10 shall be subject to the provisions of this Article.
(Source: P.A. 86- 1328.)

    (805 ILCS 5/2A.15) (from Ch. 32, par. 2A.15)
    Sec. 2A.15. Limitations on continuation of close corporation status. A close corporation continues to be such and to be subject to this Article until:
    (1) It files with the Secretary of State articles of amendment deleting from its articles of incorporation the provisions required by Sections 2A.05 hereof pursuant to subsection (a) of Section 2A.20; or
    (2) Any one of the restrictions on the transfer of shares set forth in paragraph (s) of Section 1.80 to qualify a corporation as a close corporation has in fact been breached or removed and neither the corporation nor any of its shareholders proceeds under Section 2A.30 of this Act to prevent such loss of status or to remedy such breach.
(Source: P.A. 86- 1328.)

    (805 ILCS 5/2A.20) (from Ch. 32, par. 2A.20)
    Sec. 2A.20. Voluntary termination of close corporation status by amendment of articles of incorporation; vote required.
    (a) A corporation may voluntarily terminate its status as a close corporation and cease to be subject to this Article 2A by amending its articles of incorporation to delete therefrom the additional provisions required by Section 2A.05 to be stated in the articles of incorporation of a close corporation and deleting from its articles of incorporation, or terminating or amending any shareholder agreement containing, provisions available only to close corporations. Any such amendment to the articles of incorporation shall be adopted and shall become effective in accordance with Section 10.20 except that, subsection (d) of Section 10.20 notwithstanding, it must be approved in writing or by a vote of the holders of record of at least two- thirds of the outstanding shares of each class of the corporation.
    (b) The articles of incorporation of a close corporation may provide that on any amendment to terminate its status as a close corporation, a unanimous vote or any vote greater than two- thirds of the shares of any class shall be required; and, if the articles of incorporation contain such a provision, that provision shall not be amended, repealed or modified by any vote less than that so required to terminate the corporation's status as a close corporation.
(Source: P.A. 86- 1328.)

    (805 ILCS 5/2A.25) (from Ch. 32, par. 2A.25)
    Sec. 2A.25. Issuance or transfer of shares of a close corporation in breach of qualifying conditions.
    (a) Every certificate representing shares issued by a close corporation shall conspicuously set forth upon the face or back of the certificate a full statement of all restrictions on transfer and the qualifications of shareholders and the existence of any written agreement permitted under Section 2A.40. Such full statement may be omitted from the certificate if it is conspicuously stated upon the face or back of the certificate that such statement and written agreement, if any, in full, will be furnished by the corporation to any shareholder upon request and without charge.
    (b) Any person to whom certificates representing shares of a close corporation containing either statement required by subsection (a) of this Section are issued or assigned is conclusively presumed to have notice (i) of the fact of his ineligibility to be a shareholder, (ii) that he has acquired shares in violation of a restriction on transfer allowed pursuant to this Article, and (iii) of the provisions of a written agreement permitted under Section 2A.40.
    (c) Whenever any person to whom shares of a close corporation have been issued or assigned has, or is conclusively presumed under this Section to have, notice either (i) that he is a person not eligible to be a shareholder of the corporation, or (ii) that the assignment of shares is in violation of a restriction on transfer of shares allowed pursuant to this Article, the corporation shall refuse to register or transfer the shares into the name of the assignee.
    (d) The provisions of subsection (c) of this Section shall not be applicable if the issuance or transfer of shares has been consented to by all of the shareholders of each class of the close corporation, or if the close corporation has amended its articles of incorporation in accordance with Section 2A.10.
    (e) The term "transfer" or "assign" as used in this Section is not limited to a transfer or assignment for value.
    (f) The provisions of this Section do not in any way impair any rights of an assignee regarding any right to rescind the transaction or to recover under any applicable warranty, express or implied.
(Source: P.A. 86- 1328.)

    (805 ILCS 5/2A.30) (from Ch. 32, par. 2A.30)
    Sec. 2A.30. Involuntary termination of close corporation status; proceeding to prevent loss of status.
    (a) If any event occurs that results in the breach of one or more of the provisions or conditions set forth in paragraph (s) of Section 1.80 as necessary to qualify the corporation as a close corporation, then upon discovery by the corporation of the event, the corporation shall promptly notify all of the shareholders in writing of the event and of the shareholders' rights under subsection (b) of this Section. If, within 90 days after such notification, the breach is not remedied or a proceeding under subsection (b) of this Section is not commenced, then the corporation's status as a close corporation under this Article shall terminate. In the event that all of the shareholders of the corporation are not so notified within one year after the discovery by the corporation, or a shareholder thereof, of the breach, then the corporation's status as a close corporation under this Article shall terminate as of the last day of that one year period, unless within that one year period the breach is remedied or a proceeding is commenced under subsection (b) of this Section. Upon termination as a close corporation, the corporation shall no longer be governed by this Article, but shall continue to be governed by the remaining provisions of this Act.
    (b) The circuit court of the county in which the registered office of the corporation is located, upon the suit of the corporation or any shareholder thereof, shall have jurisdiction to issue all orders necessary to prevent the corporation from losing its status as a close corporation, or to restore its status as a close corporation by enjoining or setting aside any act or threatened act on the part of the corporation or a shareholder thereof which would be inconsistent with any of the provisions or conditions set forth in paragraph (s) of Section 1.80 as necessary to qualify the corporation as a close corporation, unless it is an action approved in accordance with Section 2A.25. The circuit court shall enjoin or set aside any transfer or threatened transfer of shares of a close corporation which is contrary to any transfer restriction set forth in paragraph (s) of Section 1.80.
(Source: P.A. 86- 1328.)

(805 ILCS 5/2A.31) (from Ch. 32, par. 2A.31)
Sec. 2A.31. Corporate option where a restriction on transfer of shares is held invalid. If a restriction on transfer of shares of close corporation is held by the circuit court in a proceeding pursuant to subsection (b) of Section 2A.30 to be invalid, the corporation shall nevertheless have an option, for a period of 30 days after the judgment setting aside the restriction becomes final, to acquire the restricted shares at a price which is agreed upon by the parties, or if no agreement is reached as to price within such 30 day period, then at the fair value of such shares as determined by the circuit court. Upon determining the fair value of such shares, the court shall set forth in its order the purchase price and the time within which payment shall be made and may decree such other terms and conditions of sale as it determines to be appropriate, including payment of the purchase price in installments over a period of time.
(Source: P.A. 86- 1328.)

    (805 ILCS 5/2A.40) (from Ch. 32, par. 2A.40)
    Sec. 2A.40. Written agreements as to conduct of certain affairs of corporation.
    (a) All shareholders of a close corporation may enter into a written agreement, relating to any phase of the affairs of the corporation, including, but not limited to, the following:
        (1) Management of the business of the corporation.
        (2) Declaration and payment of dividends or division

of profits.

(3) Who shall be officers or directors, or both, of

the corporation.

(4) Restrictions on transfer of shares specified

pursuant to paragraph (s) of Section 1.80.

(5) Voting requirements, including the requirements

of unanimous voting of shareholders or directors.

(6) Employment of shareholders by the corporation.
(7) Arbitration of issues as to which the

shareholders are deadlocked in voting power or as to which the directors are deadlocked and the shareholders are unable to break the deadlock.

(b) No written agreement to which shareholders of a close corporation have actually assented, whether embodied in the articles of incorporation or bylaws of the corporation or in any separate written agreement and which relates to any phase of the affairs of the corporation, whether to the management of its business or division of its profits or otherwise, shall be invalid as between the parties thereto, on the ground that it is an attempt by the parties thereto to treat the corporation as if it were a partnership or to arrange their relationships in a manner that would be appropriate only between partners.
(c) If the business of a close corporation is managed by a board of directors, an agreement among all of the shareholders, whether solely among themselves or between all of them and a party who is not a shareholder, is not invalid, as among the parties thereto, on the ground that it so relates to the conduct of the affairs of the corporation as to interfere with the discretion of the board of directors, but the making of such an agreement shall impose upon the shareholders the liability for managerial acts that is imposed by the laws of this State upon directors.
(Source: P.A. 86- 1328.)

    (805 ILCS 5/2A.45) (from Ch. 32, par. 2A.45)
    Sec. 2A.45. Management by shareholders.
    (a) The articles of incorporation of a close corporation may provide that the business of the corporation shall be managed by the shareholders of the corporation rather than by a board of directors. So long as this provision continues in effect:
        (1) no meeting of shareholders need be called to

elect directors;

(2) unless the context clearly requires otherwise,

the shareholders of the corporation shall be deemed to be directors for purposes of applying provisions of this Act;

(3) shareholders shall act in the same manner as

directors are required to act under Article 8 to the extent not inconsistent with this Article and unless the articles of incorporation provide otherwise; and

(4) the shareholders of the corporation shall be

subject to all liabilities of directors.

(b) A provision authorized by subsection (a) of this Section may be inserted in the articles of incorporation by amendment if all subscribers and shareholders of record, or if no shares have been issued, all incorporators and subscribers authorize such a provision. An amendment to the articles of incorporation to delete such provision shall be adopted, subsection (d) of Section 10.20 notwithstanding, by a vote of the holders of record of all the outstanding shares of each class of the corporation. If the articles of incorporation contain a provision authorized by this Section the existence of such provision shall be noted conspicuously on the face or back of every certificate representing shares issued by the corporation.
(Source: P.A. 86- 1328.)

    (805 ILCS 5/2A.50) (from Ch. 32, par. 2A.50)
    Sec. 2A.50. Shareholders' option to dissolve corporation.
    (a) The articles of incorporation of any close corporation may include a provision granting to any shareholder, or to the holders of any specified number or percentage of shares of any class, an option to have the corporation dissolved at will or upon the occurrence of any specified event or contingency. Whenever any such option to dissolve is exercised, the shareholders exercising such option shall give written notice thereof to all other shareholders. After the expiration of 30 days following the sending of such notice, the dissolution of the corporation shall proceed as if the required number of shareholders having voting power had consented in writing to dissolution of the corporation.
    (b) If the articles of incorporation as originally filed do not contain a provision authorized by subsection (a) of this Section, the articles of incorporation may be amended to include such provision if adopted, subsection (d) of Section 10.20 notwithstanding, by the affirmative vote of the holders of record of all the outstanding shares of each class of the corporation.
    (c) Every certificate representing shares issued by a close corporation of which the articles of incorporation authorize dissolution as permitted by this Section shall conspicuously note on the face or back thereof the existence of the provision. Unless noted conspicuously on the face or back of the share certificate, the provision shall be ineffective.
(Source: P.A. 86- 1328.)

(805 ILCS 5/2A.55) (from Ch. 32, par. 2A.55)
Sec. 2A.55. Dissolution. Subject to Section 2A.50, the provisions of Article 12 shall apply to the dissolution of a close corporation.
(Source: P.A. 86- 1328.)

    (805 ILCS 5/2A.60) (from Ch. 32, par. 2A.60)
    Sec. 2A.60. Applicability.
    (a) Any corporation organized and existing under The Close Corporation Act on the effective date of this amendatory Act of 1990 shall be deemed to be a close corporation subject to the provisions of this Article.
    (b) Any corporation which is not a close corporation shall not be subject to the provisions of this Article nor shall the provisions of this Article be construed to amend or modify any statute or rule of common law otherwise applicable to such a corporation.
(Source: P.A. 86- 1328.)