Corporate Director and Shareholder Liability for Unlawful Distributions in Illinois

At a glance

Requirements one by one

Director liability and the prohibited distribution

Under 805 ILCS 5/8.65(a)(1), directors who vote for or assent to a distribution prohibited by § 9.10 are jointly and severally liable to the corporation for the amount of that distribution. The section uses the amount of the prohibited payment rather than an express excess-only measure. Section 9.10(a) makes articles restrictions relevant; subsection (c) bars a payment if it would leave the corporation insolvent or below the statutory net-asset floor.

Dissent and reliance

Section 8.65(b) conclusively presumes that a director present at a board meeting assented unless the director's dissent is entered in the minutes, submitted in writing before adjournment, or sent by registered or certified mail immediately afterward. A director who voted in favor cannot use that dissent route. Subsection (c) protects a director who relied and acted in good faith on the specified officer-represented or accountant-certified financial statements, or considered assets at book value in good faith when determining the available amount.

Contribution

Under § 8.65(d), a director held liable may seek contribution from other directors likewise liable. The same subsection permits proportional contribution from shareholders who knowingly accepted or received the improper distribution. It does not turn every receipt into a direct claim by the corporation under this section.

What trips people up

The statute's other § 8.65(a) branches concern a dissolved corporation's failure to notify known creditors under § 12.75 or carrying on business after dissolution. They impose separate creditor-facing liabilities with different triggers. The prohibited-distribution branch in § 8.65(a)(1) names the corporation as the beneficiary.

Common questions

Is a director safe by abstaining at the meeting?

An abstention alone does not meet § 8.65(b)'s dissent procedure. A present director must use one of its minute or timely written-dissent routes to avoid the conclusive presumption of assent.

What filing deadline does the liability section give?

Section 8.65 does not state a specific time period for its distribution claim or contribution. A generally applicable limitations rule would need separate review; this cell does not calculate one.

Statutes and sources

• 805 ILCS 5/8.65, accessed September 27, 2026: approving directors “shall be jointly and severally liable to the corporation for the amount of such distribution”; subsections (b)–(d) cover dissent, reliance, and contribution.
• 805 ILCS 5/9.10, accessed September 27, 2026: subsection (c) begins, “No distribution may be made if, after giving it effect,” and states the insolvency and net-asset limits.