§ 55-7-44. Dismissal.

621 words·~3 min read·/nc/chapter-55/55-7-44

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(a)The court shall dismiss a derivative proceeding on motion of the corporation if a determination is made, whether before or after the commencement of the derivative proceeding, by one of the groups specified in subsection

(b)of this section 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 interest of the corporation.

(b)The inquiry and determination in subsection

(a)of this section shall be made by any of the following:

(1)A majority vote of independent directors present at a meeting of the board of directors if the independent directors constitute a quorum.

(2)A majority vote of a committee consisting of two or more independent directors appointed by majority vote of independent directors present at a meeting of the board of directors, whether or not the independent directors constituted a quorum.

(3)Upon motion by the corporation, by a panel of one or more individuals appointed by the court.

(c)For purposes of this section, none of the following factors by itself shall cause a director to be considered not independent:

(1)The nomination or election of the director by any person who is a defendant in the derivative proceeding or against whom action is demanded.

(2)The naming of the director as a defendant in the derivative proceeding or as a person against whom action is demanded.

(3)The approval by the director of the act being challenged in the derivative proceeding or demand if the act resulted in no personal benefit to the director.

(d)If a determination has been made by one of the groups specified in subsection

(b)of this section that maintaining the derivative proceeding is not in the best interest of the corporation, in order to contest the determination, the plaintiff shall allege with particularity facts establishing that the requirements of subsection

(a)of this section have not been met. Defendants may make a motion to dismiss a complaint under subsection

(a)of this section for failure to comply with this subsection. Prior to the court's ruling on the motion to dismiss, the plaintiff is entitled to discovery only with respect to the issues presented by the motion and only if and to the extent that the plaintiff has alleged the facts with particularity. The preliminary discovery shall be limited solely to matters germane and necessary to support the facts alleged with particularity relating solely to the requirements of subsection

(a)of this section.

(e)The burden of proving whether the requirements of subsection

(a)of this section have been met is determined as follows:

(1)If the determination was made by one of the groups specified in subdivision (b)(1) or (b)(2) of this section, then the plaintiff has the burden of proving that the requirements of subsection

(a)of this section have not been met unless the plaintiff has alleged with particularity facts establishing that a majority of the board of directors at the time the determination was made did not consist of independent directors, in which case the corporation has the burden of proving that the requirements of subsection

(a)of this section have been met.

(2)If the determination was made by a panel appointed pursuant to subdivision (b)(3) of this section, then the plaintiff has the burden of proving that the requirements of subsection

(a)of this section have not been met.

(f)The court on its own motion or on the motion of any party may order that any motion to dismiss under subsection

(a)of this section be made within a specified reasonable time. (1995, c. 149, s. 1; c. 509, s. 135.2(t); 2025-33, s. 5(c).)