§ 48-56-401 — Derivative suits

(a) A proceeding may be brought in the right of a domestic or foreign corporation to procure a judgment in its favor by: (1) Any member or members having five percent (5%) or more of the voting power or by fifty (50) members, whichever is less; or (2) Any director. (b) In any such proceeding, each plaintiff shall be a member or director at the time of bringing the proceeding. (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 directors and either why the plaintiffs could not obtain the action or why they did not make the demand. If a demand for action was made and the corporation's investigation of the demand is in progress when the proceeding is filed, the court may stay the suit 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 members or a class of members, the court shall direct that notice be given the members affected. If notice is so directed to be given, the court may determine which party or parties to the suit shall bear the expense of giving such notice, in such proportion as the court finds to be reasonable in the circumstances, and the amount of such expense shall be awarded as special costs of the suit and recoverable in the same manner as other taxable costs. (e) On termination of the proceeding, the court may require the plaintiffs to pay any defendant's reasonable expenses (including counsel fees) incurred in defending the suit if it finds that the proceeding was commenced frivolously or in bad faith. (f) If the proceeding on behalf of the corporation results in the corporation taking some action requested by the plaintiffs or otherwise was successful, in whole or in part, or if anything was received by the plaintiffs as a result of a judgment, compromise, or settlement of an action or claim, the court may award the plaintiffs reasonable expenses (including counsel fees). (g) The plaintiffs shall notify the attorney general and reporter within ten (10) days after commencing any proceedings under this section if the proceeding involves a public benefit corporation or assets held in charitable trust by a mutual benefit corporation.

Legislative History

Acts 1987, ch. 242, § 6.40.