For the purposes of this part, the term:
(1) "Derivative proceeding" means a civil action in the right of a domestic corporation or, to the extent provided in § 29-305.57, in the right of a foreign corporation.
(2) "Shareholder" includes a beneficial owner whose shares are held in a voting trust or held by a nominee on the beneficial owner's behalf.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
A shareholder shall not commence or maintain a derivative proceeding unless the shareholder:
(1) Was a shareholder of the corporation at the time of the act or omission complained of or became a shareholder through transfer by operation of law from one that was a shareholder at that time; and
(2) Fairly and adequately represents the interests of the corporation in enforcing the right of the corporation.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
A shareholder shall not commence a derivative proceeding until:
(1) A written demand has been made upon the corporation to take suitable action; and
(2) Ninety days have expired from the date the demand was made unless
(A) The shareholder has earlier been notified that the demand has been rejected by the corporation; or
(B) Irreparable injury to the corporation would result by waiting for the expiration of the 90-day period.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
If the corporation commences an inquiry into the allegations made in the demand or complaint, the Superior Court may stay any derivative proceeding for such period as the court consider appropriate.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
(a) The Superior Court shall dismiss a derivative proceeding on motion by the corporation if one of the groups specified in subsection (b) or subsection (e) of this section has determined in good faith, after conducting a reasonable inquiry upon which its conclusions are based, that the maintenance of the derivative proceeding is not in the best interests of the corporation.
(b) Unless a panel is appointed pursuant to subsection (e) of this section, the determination in subsection (a) of this section shall be made by a majority vote of:
(1) Qualified directors present at a meeting of the board of directors if the qualified directors constitute a quorum; or
(2) A committee consisting of 2 or more qualified directors appointed by majority vote of qualified directors present at a meeting of the board of directors, regardless of whether the qualified directors constitute a quorum.
(c) If a derivative proceeding is commenced after a determination has been made rejecting a demand by a shareholder, the complaint shall allege with particularity facts establishing that:
(1) A majority of the board of directors did not consist of qualified directors at the time the determination was made; or
(2) The requirements of subsection (a) of this section have not been met.
(d) If a majority of the board of directors consisted of qualified directors at the time the determination was made, the plaintiff shall have the burden of proving that the requirements of subsection (a) of this section have not been met. Otherwise, the corporation has the burden of proving that the requirements of subsection (a) of this section have been met.
(e) Upon motion by the corporation, the Superior 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 such case, the plaintiff has the burden of proving that the requirements of subsection (a) of this section have not been met.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
A derivative proceeding shall not be discontinued or settled without the Superior Court's approval. If the court determines that a proposed discontinuance or settlement will substantially affect the interests of the corporation's shareholders or a class of shareholders, the court shall direct that notice be given to the shareholders affected.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
On termination of the derivative proceeding, the Superior Court may order:
(1) The corporation to pay the plaintiff's expenses incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the corporation;
(2) The plaintiff to pay any defendant's expenses incurred in defending the proceeding if it finds that the proceeding was commenced or maintained without reasonable cause or for an improper purpose; or
(3) A party to pay an opposing party's expenses incurred because of the filing of a pleading, motion, or other paper if it finds that the pleading, motion, or other paper was not well grounded in fact, after reasonable inquiry, or warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law and was interposed for an improper purpose, such as to harass or cause unnecessary delay or needless increase in the cost of litigation.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
In any derivative proceeding in the right of a foreign corporation, the matters covered by this part shall be governed by the laws of the jurisdiction of incorporation of the foreign corporation, except for §§ 29-305.53, 29- 305.55, and 29-305.56.
(July 2, 2011, D.C. Law 18-378, § 2, 58 DCR 1720.)
HISTORICAL AND STATUTORY NOTES
Legislative History of Laws
For history of Law 18-378, see notes under § 29-101.01.
