§ 7-107-402 — Actions by shareholders

(1) No action shall be commenced by a
shareholder in the right of a domestic corporation, and no action shall be
commenced in this state by a shareholder in the right of a foreign corporation,
unless the plaintiff was a shareholder of the corporation at the time of the
transaction of which the plaintiff complains or the plaintiff is a person upon whom
shares or voting trust certificates thereafter devolved by operation of law from a
person who was a shareholder at such time.

(2) In any action instituted on or after January 1, 1959, in the right of any
domestic or foreign corporation by a shareholder, the court having jurisdiction, upon
final judgment and a finding that the action was commenced without reasonable
cause, shall require the plaintiff to pay to the parties named as defendants the
costs and reasonable expenses directly attributable to the defense of such action,
but not including fees of attorneys.

(3) In any action pending, instituted, or maintained on or after January 1,
1959, in the right of any domestic or foreign corporation by a shareholder holding
less than five percent of the outstanding shares of any class of such corporation or
of voting trust certificates therefor, unless the shares or voting trust certificates so
held have a market value in excess of twenty-five thousand dollars, the corporation
in whose right such action is commenced shall be entitled, at any time before final
judgment, to require the plaintiff to give security for the costs and reasonable
expenses which may be directly attributable to and incurred by it in the defense of
such action or may be incurred by other parties named as defendant for which it
may become legally liable, but not including fees of attorneys. Market value shall
be determined as of the date that the plaintiff institutes the action or, in the case of
an intervenor, as of the date that the plaintiff becomes a party to the action. The
amount of such security may from time to time be increased or decreased, in the
discretion of the court, upon showing that the security provided has or may become
inadequate or is excessive. If the court finds that the action was commenced
without reasonable cause, the corporation shall have recourse to such security in
such amount as the court shall determine upon the termination of such action.

Legislative History

Source: L. 93: Entire article added, p. 777, � 1, effective July 1, 1994.