(a)General rule.--Except as provided in subsection (b), in any action or proceeding brought by one or more partners of a limited partnership to enforce rights that the plaintiff claims could be, but have not been, asserted by the partnership, each plaintiff has standing to commence and maintain a derivative action only if the plaintiff:
(1)was a partner at the time of the transaction or conduct of which the plaintiff complains, or that the plaintiff's interest as a partner devolved upon the plaintiff by operation of law from a person who was a partner at that time; and
(2)continues to be a partner until the time of judgment, unless the failure to do so is the result of partnership action that:
(i)was done merely to eliminate derivative claims; or
(ii)has the effect of a reorganiza
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(a) General rule.--Except as provided in subsection (b), in any action or proceeding brought by one or more partners of a limited partnership to enforce rights that the plaintiff claims could be, but have not been, asserted by the partnership, each plaintiff has standing to commence and maintain a derivative action only if the plaintiff:
(1) was a partner at the time of the transaction or conduct of which the plaintiff complains, or that the plaintiff's interest as a partner devolved upon the plaintiff by operation of law from a person who was a partner at that time; and
(2) continues to be a partner until the time of judgment, unless the failure to do so is the result of partnership action that:
(i) was done merely to eliminate derivative claims; or
(ii) has the effect of a reorganization that does not affect the plaintiff's ownership of the business enterprise.
(b) Exception.--Any partner that, except for the provisions of subsection (a), would be entitled to maintain the action or proceeding and that does not meet such requirements may, nevertheless in the discretion of the court, be allowed to maintain the action or proceeding on preliminary showing to the court, by application and upon such verified statements and depositions as may be required by the court, that there is a strong prima facie case in favor of the claim asserted on behalf of the limited partnership and that without the action serious injustice will result.
(c) Security for costs.--In any action or proceeding instituted or maintained by partners holding transferable interests entitled to receive less than 5% of any distribution by a limited partnership, unless the transferable interests held by the partners have an aggregate fair market value in excess of $200,000, the partnership in whose right the action or proceeding is brought shall be entitled at any stage of the proceedings to require the plaintiffs to give security for the reasonable expenses, including attorneys' fees, that may be incurred by the partnership in connection therewith or for which it may become liable pursuant to section 8648(b) (relating to reimbursement, indemnification, advancement and insurance) to which security the partnership shall have recourse in such amount as the court determines upon the termination of the action or proceeding. The amount of security may, from time to time, be increased or decreased in the discretion of the court upon showing that the security provided has or is likely to become inadequate or excessive. The security may be denied or limited by the court if the court finds after an evidentiary hearing that undue hardship on plaintiffs and serious injustice would result.
(d) Failure to maintain ownership.--If a plaintiff loses the right to maintain a derivative action under subsection (a)(2), the court may entertain a motion by the limited partnership to substitute the partnership as the named plaintiff.