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the Kentucky Revised Statutes
2009 Kentucky Revised Statutes
Subtitle 7 Shareholders
271B.7.400 Procedure in derivative proceedings.
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271B.7-400 Procedure in derivative proceedings.
(1) A person shall not commence a proceeding in the right of a domestic or foreign
corporation unless he was a shareholder of the corporation when the transaction <br>complained of occurred or unless he became a shareholder through transfer by <br>operation of law from one who was a shareholder at that time. The derivative <br>proceeding shall not be maintained if it appears that the person commencing the <br>proceeding does not fairly and adequately represent the interests of the shareholders <br>in enforcing the right of the corporation.
(2) A complaint in a proceeding brought in the right of a corporation shall be verified
and allege with particularity the demand made, if any, to obtain action by the board <br>of directors and either that the demand was refused or ignored or why he did not <br>make the demand. Whether or not a demand for action was made, if the corporation <br>commences an investigation of the charges made in the demand or complaint, the <br>court may stay any proceeding until the investigation is completed.
(3) 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 <br>or settlement will substantially affect the interest of the corporation's shareholders <br>or a class of shareholders, the court shall direct that notice be given the shareholders <br>affected.
(4) On termination of the proceeding the court may require the plaintiff to pay any
defendant's reasonable expenses, including counsel fees, incurred in defending the <br>proceeding if it finds that the proceeding was commenced without reasonable cause.
(5) For purposes of this section, "shareholder" includes a beneficial owner whose shares
are held in a voting trust or held by a nominee on his behalf.
(6) In any derivative proceedings in the right of a foreign corporation, the matters
covered by this section shall be governed by the laws of the jurisdiction of <br>incorporation.
Effective: July 15, 2010 <br>History: Repealed and reenacted 2010 Ky. Acts ch. 51, sec. 64, effective July 15, 2010.
-- Amended 2007 Ky. Acts ch. 137, sec. 64, effective June 26, 2007. -- Created 1988 <br>Ky. Acts ch. 23, sec. 67, effective January 1, 1989.
Legislative Research Commission Note (7/15/2010). 2010 Ky. Acts ch. 51, sec. 183,
provides, "The specific textual provisions of Sections 1 to 178 of this Act which <br>reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed <br>effective as of June 26, 2007, and those provisions are hereby made expressly <br>retroactive to that date, with the remainder of the text of those sections being <br>unaffected by the provisions of this section."
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