271B.7-400 Procedure in derivative proceedings.
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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
complained of occurred or unless he became a shareholder through transfer by
operation of law from one who was a shareholder at that time. The derivative
proceeding shall 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.
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
of directors and either that the demand was refused or ignored or why he 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, the
court may stay any proceeding until the investigation is completed.
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 counsel fees, incurred in defending the
proceeding if it finds that the proceeding was commenced without reasonable cause.
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.
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
incorporation.
Effective: July 15, 2010
History: Repealed and reenacted 2010 Ky.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
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
reflect amendments made to those sections by 2007 Ky. Acts ch. 137 shall be deemed
effective as of June 26, 2007, and those provisions are hereby made expressly
retroactive to that date, with the remainder of the text of those sections being
unaffected by the provisions of this section."
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