35-14-744. Dismissal. (1) A derivative proceeding must be dismissed by the court on motion by the corporation if one of the groups specified in subsection (2) or (5) has determined in good faith, after conducting a reasonable inquiry on which its conclusions are based, that the maintenance of the derivative proceeding is not in the best interests of the corporation.

(2) Unless a panel is appointed pursuant to subsection (5), the determination in subsection (1) must be made by:

(a) a majority vote of qualified directors present at a meeting of the board of directors if the qualified directors constitute a quorum; or

(b) a majority vote of a committee consisting of two or more qualified directors appointed by majority vote of qualified directors present at a meeting of the board of directors, regardless of whether those qualified directors constitute a quorum.

(3) If a derivative proceeding is commenced after a determination has been made rejecting a demand by a shareholder, the complaint must allege with particularity facts establishing either:

(a) that a majority of the board of directors did not consist of qualified directors at the time the determination was made; or

(b) that the requirements of subsection (1) have not been met.

(4) If a majority of the board of directors consisted of qualified directors at the time the determination was made, the plaintiff has the burden of proving that the requirements of subsection (1) have not been met. If not, the corporation has the burden of proving that the requirements of subsection (1) have been met.

(5) Upon motion by the corporation, the court may appoint a panel of one or more individuals to make a determination whether the maintenance of the derivative proceeding is in the best interests of the corporation. In that case, the plaintiff has the burden of proving that the requirements of subsection (1) have not been met.

History: En. Sec. 87, Ch. 271, L. 2019.