2010 Arkansas Code
4-26-714. Shareholders' actions.
Title 4 - Business and Commercial Law
Subtitle 3 - Corporations And Associations
Chapter 26 - Business Corporations Generally
Subchapter 7 - Shareholders
§ 4-26-714 - Shareholders' actions.
(a) No action shall be brought in this state by a shareholder in the right of a domestic corporation unless the plaintiff was a holder of shares or of voting trust certificates at the time of the transaction of which he complains, or his shares or voting trust certificates thereafter devolved upon him by operation of law from a person who was a holder at that time.
(b) In any action hereafter instituted in the right of any domestic corporation by the holder of shares of the corporation or of voting trust certificates therefor, the court having jurisdiction, upon final judgment and a finding that the action was brought without reasonable cause, may require the plaintiff to pay to the parties named as defendant the reasonable expenses, including fees of attorneys, incurred by them in the defense of such action.
(c) (1) In any action instituted in the right of a domestic corporation by the holders of less than five percent (5%) of the outstanding shares of any class of the 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 ($25,000), the corporation in whose right the action is brought or any defendant may move the court for an order, upon notice and hearing, requiring plaintiff to furnish security as provided in this section.
(2) The motion may be based upon one (1) or more of the following grounds:
(A) That there is no reasonable possibility that the prosecution of the cause of action alleged in the complaint against the moving party will benefit the corporation or its security holders.
(B) That the moving party, if other than the corporation, did not participate in the transaction complained of in any capacity.
(3) At the hearing upon the motion, the court shall consider such evidence, written or oral, by witnesses or affidavit, as may be material to the grounds upon which the motion is based, or to a determination of the probable reasonable expenses, including attorneys' fees, of the corporation and the moving party which will be incurred in the defense of the action.
(4) If the court determines, after hearing the evidence adduced by the parties at the hearing, that the moving party has established a probability in support of any of the grounds upon which the motion is based, the court shall fix the nature and amount of security to be furnished by the plaintiff for reasonable expenses, including attorneys' fees, which may be incurred by the moving party and the corporation in connection with such action, including, but without limiting, the foregoing expenses for which the corporation may become liable pursuant to 4-26-814.
(5) A determination by the court that security either shall or shall not be furnished or shall be furnished as to one (1) or more defendants and not as to others shall not be deemed a determination of any one (1) or more issues in the action or of the merits thereof.
(6) The corporation and the moving party may have recourse to the security in such amount as the court shall determine upon the termination of the action.
(7) 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 may become inadequate or is excessive.
(8) If the court makes a determination that security shall be furnished by the plaintiff for the benefit of any one (1) or more defendants, the action shall be dismissed as to such defendant unless the security required by the court shall have been furnished within such reasonable time as may be fixed by the court.
(9) If any such motion is filed, no pleadings need be filed by the corporation or any other defendant, and the prosecution of the action shall be stayed until ten (10) days after the motion shall have been disposed of.
(d) A suit filed by a shareholder in the right of a domestic corporation may not be dismissed or compromised without the approval of the court.
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