2017 Pennsylvania Consolidated Statutes
Title 15 - CORPORATIONS AND UNINCORPORATED ASSOCIATIONS
Chapter 17 - Officers, Directors and Shareholders
Section 1781 - Derivative action

(a) General rule.--Subject to section 1782 (relating to eligible shareholder plaintiffs and security for costs) and subsection (b), a plaintiff may maintain a derivative action to enforce a right of a business corporation only if:

(1) the plaintiff first makes a demand on the corporation or the board of directors requesting that it cause the corporation to bring an action to enforce the right, and:

(i) if a special litigation committee is not appointed under section 1783 (relating to special litigation committee), the corporation does not bring the action within a reasonable time; or

(ii) if a special litigation committee is appointed under section 1783, a determination is made:

(A) under section 1783(e)(1) that the corporation not object to the action; or

(B) under section 1783(e)(5)(i) that the plaintiff continue the action;

(2) demand is excused under subsection (b);

(3) the action is maintained for the limited purpose of seeking court review under section 1783(f); or

(4) the court has allowed the action to continue under the control of the plaintiff under section 1783(f)(3)(ii).

(b) Prior demand excused.--

(1) A demand under subsection (a)(1) is excused only if the plaintiff makes a specific showing that immediate and irreparable harm to the business corporation would otherwise result.

(2) If demand is excused under paragraph (1), demand shall be made promptly upon commencement of the action.

(c) Contents of demand.--A demand under this section must be in record form and give notice with reasonable specificity of the essential facts relied upon to support each of the claims made in the demand.

(d) Additional claims.--If a derivative action is commenced after a demand has been made under this section and includes a claim that was not fairly subsumed under the demand, a new demand must be made with respect to that claim. The new demand shall not relate back to the date of the original demand for purposes of subsection (e).

(e) Statute of limitations.--The making of a demand tolls any applicable statute of limitations with respect to a claim asserted in the demand until the earlier of the date:

(1) the plaintiff making the demand is notified either:

(i) that the board of directors has decided not to bring an action and not to appoint a special litigation committee; or

(ii) of a determination under section 1783(e) after the appointment of a special litigation committee under section 1783; or

(2) the plaintiff commences an action asserting the claim.

(f) Certain provisions of articles ineffective.--This section may not be relaxed by any provision of the articles.

(Nov. 21, 2016, P.L.1328, No.170, eff. 90 days)