AN ACT TO AMEND THE STATUTES RELATING TO THE PROCEDURES IN SHAREHOLDER DERIVATIVE SUITS.
Amends GS 55-7-40.1, the definitions section for the provisions concerning shareholder derivative suits, adding a new key term complaint, a civil complaint filed in a derivative proceeding, and making clarifying changes to the terms derivative proceeding and shareholder.
Renames GS 55-7-42 to Demand; rejection of demand (was, Demand). Clarifies provisions regarding the commencement of a derivative proceeding by a shareholder, including a new exception to the 90-day wait period after a written demand was made, when a shareholder alleges with particularity and the court determines that imminent irreparable injury to the corporation will result by waiting for the expiration of the 90-day period. Sets out other provisions providing that failure of the corporation to respond to a demand cannot be deemed to be a decision or acknowledgment that the derivative proceeding is in the best interest of the corporation. Also requires the corporation to promptly provide written notice of any rejection of the demand.
Amends GS 55-7-43 concerning the stay of proceedings in shareholder derivative suits, providing that when the corporation commences an inquiry into the allegations as provided for in a demand or complaint as specified, then the court must stay the proceeding for a reasonable time period while the inquiry is completed and the results are presented to the court (previously, allowed, but did not require, a stay). Makes clarifying changes. Adds language detailing when a corporation or other defendant can move to dismiss complaints pursuant to the dismissal provisions found in GS 55-7-44(a)(4) or (5). Provides that upon such a motion, discovery is stayed until the motion is ruled on, except for discovery permitted pursuant to GS 55-7-44(a), as amended in this act.
Deletes all of the provisions of GS 55-7-44 in their entirety concerning the dismissal of derivative proceedings. Adds new language setting out five circumstances where the court must dismiss a derivative proceeding on motion by the corporation or any other defendant, including that the corporation institutes its own proceeding to address or seek relief on account of, or with respect to, the allegations in the demand or the complaint or the court determines that the proceeding should be dismissed for failure to state a claim for which relief can be granted.
Sets out provisions governing inquiries by the corporation in response to a demand or complaint providing that such an inquiry can be conducted by directors, officers, employees, attorneys, or agents acting as authorized by the corporation. Provides for the appointment of a committee of one or more qualified directors as specified. Also allows for the court to appoint a panel of one or more individuals to direct the inquiry with the end of determining if the derivative proceeding is in the best interest of the corporation. Sets out the following terms for use in this section: material interest, material relationship, and qualified director.
Amends GS 55-7-45(a) concerning the discontinuance or settlement of derivative proceedings, clarifying that notices providing that the discontinuance or settlement will substantially affect shareholder interests can be provided in any method approved by the court, including through publication of a press release by a news release service for a public corporation.
Amends GS 55-7-47 concerning foreign corporations, providing that the repose period provided for in GS 55-7-48(2) only applies to a foreign corporation if its principal office is in North Carolina.
Amends GS 55-7-48, clarifying requirements of plaintiffs in derivative proceedings brought on behalf of a public corporation against directors for monetary damages, providing that, upon the motion of the corporation at any time prior to a final resolution, the plaintiff must execute and deposit with the clerk of court a written undertaking as specified to indemnify the corporation against reasonably expected expenses, including attorneys' fees. Provides that the court must consider if the derivative proceeding appears to have been commenced or maintained without reasonable cause or for an improper purpose in deciding whether to require such undertaking or surety.
Repeals GS 55-8-25(b1), concerning the creation and appointment of a committee pursuant to GS 55-7-44(b)(2), (concerning dismissal of a proceeding by vote of a committee).
Effective October 1, 2015, applying to demands made and complaints filed on or after that date.
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