Though many Illinois professionals and attorneys are unaware of the existence of the Illinois Business Brokers Act, 815 ILCS 307/10-1 (“the Act”), it includes a number of requirements for those involved in the sale of businesses and could provide important opportunities for parties in disputes over those sales. The Act applies when a business being sold is based in Illinois or when the client of a business broker is headquartered in Illinois. It defines “business brokers” broadly, including those who list businesses for sale, lease or exchange, as well as those who advertise or represent themselves as business brokers. This means that an out-of-state broker who is engaged by an Illinois company still falls within the scope of the Act and its regulations. The Act includes annual registration requirements with the Illinois Secretary of State, including an initial filing fee of $200 and annual renewal fees in the same amount.
One of the most important features of the Act is that it requires all contracts for services of the broker to be in writing and signed by all parties. Also, a business broker must provide disclosure documents within a week of when a client retains the broker’s services. The broker must set forth specific information about the broker, a detailed description of the services offered and a statement describing how the broker will be compensated. The disclosure statement must be filed with the Illinois Secretary of State. The Act also requires brokers to keep detailed records, which should be retained for six years. To avoid issues, those involved in transactions covered by the Act should be aware of these requirements and comply with them, as well as the exemptions in the Act for certain professionals (e.g., real estate brokers, banks, security dealers, investment advisors, attorneys, and accountants) exempted because separate statutes cover their activities.
The Act includes several important protections that may provide opportunities for parties in a dispute over a transaction covered by the Act. First, a business broker who is owed fees has a right to a lien on the tangible assets of a business located in Illinois that is the subject of the broker’s written contract in the amount due under the contract. The lien can attach to both real estate and personal property. To take full advantage of this protection, a number of specific requirements set forth in the Act must be completed. The Act also includes a fee-shifting clause for the prevailing party in proceedings brought to enforce (or extinguish) liens created under the Act.
In civil lawsuits, the opportunities provided by the Act include statutory penalties that are designed to supplement other rights and remedies that exist at common law. A client that is damaged by the broker’s violation of the Act can recover actual damages up to the amount of fees paid by the client, attorney’s fees and interest. Perhaps more importantly, the Act can be used as a shield by a client in a lawsuit filed by a broker to collect unpaid fees. Section 10-60 of the Act provides that a material violation of specified sections of the Act voids the business broker contract at issue and requires the business broker to return all sums paid to the broker, with interest and attorney’s fees. The Act grants the Illinois Secretary of State broad powers to enforce the Act, including conducting investigations and seeking court action against brokers suspected in engaging in acts violating the Act. In addition, the Secretary of State can impose administrative fines of up to $10,000 for each violation of the Act.
B&D attorneys have experience with the Act and would be happy to consult with you to make sure you fully comply with and take advantage of the protections offered by it.