§ 7.40.

237 words·~1 min read·/vt/7-40-2

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

§ 7.40. Procedure in derivative proceedings

(a)A person may not commence a proceeding in the right of a domestic or foreign corporation unless such person was a shareholder of the corporation when the transaction complained of occurred or unless such person became a shareholder through transfer by operation of law from one who was a shareholder at that time.

(b)A complaint in a proceeding brought in the right of a corporation must be verified and allege with particularity the demand made, if any, to obtain action by the board of directors and either that the demand was refused or ignored or why he or she did not make the demand. Whether or not a demand for action was made, if the corporation commences an investigation of the charges made in the demand or complaint, the court may stay any proceeding until the investigation is completed.

(c)A proceeding commenced under this section may not be discontinued or settled without the court’s approval. If the court determines that a proposed discontinuance or settlement will substantially affect the interest of the corporation’s shareholders or a class of shareholders, the court shall direct that notice be given the shareholders affected.

(d)For purposes of this section, “shareholder” includes a beneficial owner whose shares are held in a voting trust or held by a nominee on the shareholder’s behalf. (Added 1993, No. 85, § 2, eff. Jan. 1, 1994.)