§ 27-1-7-9.5 — Shareholders' derivative proceedings; procedure

Indiana § 27-1-7-9.5

• Jurisdiction: Indiana
• Title 27: INSURANCE
• Art. 1: DEPARTMENT OF INSURANCE
• Ch. 7: General Corporate Powers and Responsibilities of

Text

5. (a) As used in this section, "shareholder"
includes:
(1) with respect to a stock company formed under this article, a
shareholder or a beneficial owner whose shares are held in a
voting trust or held by a nominee on the owner's behalf; and
(2) with respect to a mutual company formed under this article, a
member or policyholder.
(b) A person may not commence a proceeding in the right of a
corporation unless the person was a shareholder of the corporation
when the transaction complained of occurred or unless the person
became a shareholder through transfer by operation of law from one
who was a shareholder at that time. The derivative proceeding may not
be maintained if it appears that the person commencing the proceeding
does not fairly and adequately represent the interests of the
shareholders in enforcing the right of the corporation.
(c) A complaint in a proceeding brought in the right of a corporation
must be verified and allege with particularity the demand made, if any,
to obtain action by the board of directors, and either that the demand
was refused or ignored or why the shareholder did not make the
demand. Whether or not a demand for action was made, if the
corporation commences an investigation of the charges made in the
demand or complaint (including an investigation commenced under
subsection (e)), the court may stay any proceeding until the
investigation is completed.
(d) A proceeding commenced under this section may not be
discontinued or settled without the court's approval. If the court
determines that a proposed discontinuance or settlement will
substantially affect the interest of the corporation's shareholders or a
class of shareholders, the court shall direct that notice be given the
shareholders affected. On termination of the proceeding, the court may
require the plaintiff to pay any defendant's reasonable expenses
(including attorney's fees) incurred in defending the proceeding if it
finds that the proceeding was commenced without reasonable cause.
(e) Unless prohibited by the articles of incorporation, the board of
directors may establish a committee consisting of three (3) or more
disinterested directors or other disinterested persons to determine:
(1) whether the corporation has a legal or equitable right or
remedy; and
(2) whether it is in the best interests of the corporation to pursue
that right or remedy, if any, or to dismiss a proceeding that seeks
to assert that right or remedy on behalf of the corporation.
(f) In making a determination under subsection (e), the committee
is not subject to the direction or control of or termination by the board.
A vacancy on the committee may be filled by the majority of the
remaining members by selection of another disinterested director or
other disinterested person.
(g) If the committee determines that pursuit of a right or remedy
through a derivative proceeding or otherwise is not in the best interests
of the corporation, the merits of that determination shall be presumed
to be conclusive against any shareholder making a demand or bringing
a derivative proceeding with respect to such right or remedy, unless
such shareholder can demonstrate that:
(1) the committee was not disinterested, as described in
subsection (h); or
(2) the committee's determination was not made after an
investigation conducted in good faith.
(h) For purposes of this section, a director or other person is
disinterested if the director or other person:
(1) has not been made a party to a derivative proceeding seeking
to assert the right or remedy in question, or has been made a party
but only on the basis of a frivolous or insubstantial claim or for
the sole purpose of seeking to disqualify the director or other
person from serving on the committee;
(2) is able under the circumstances to render a determination in
the best interests of the corporation; and
(3) is not an officer, employee, or agent of the corporation or of a
related corporation. However, an officer, employee, or agent of
the corporation or a related corporation who meets the standards
of subdivisions (1) through (2) shall be considered disinterested
in any case in which the right or remedy under scrutiny is not
assertable against a director or officer of the corporation or the
related corporation.

Legislative History

As added by P.L.266-1987, SEC.2.