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This entry was published on 2014-09-22
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Members' derivative action brought in the right of the corporation to procure a judgment in its favor
Not-for-Profit Corporation (NPC) CHAPTER 35, ARTICLE 6
§ 623. Members' derivative action brought in the right of the

corporation to procure a judgment in its favor.

(a) An action may be brought in the right of a domestic or foreign
corporation to procure a judgment in its favor by five percent or more
of any class of members or by such percentage of the holders of capital
certificates or of the owners of a beneficial interest in the capital
certificates of such corporation.

(b) In any such action, it shall be made to appear that each plaintiff
is such a member, holder or owner at the time of bringing the action.

(c) In any such action, the complaint shall set forth with
particularity the efforts of the plaintiff or plaintiffs to secure the
initiation of such action by the board of the reason for not making such

(d) Such action shall not be discontinued, compromised or settled
without the approval of the court having jurisdiction of the action. If
the court shall determine that the interests of the members or of any
class or classes thereof will be substantially affected by such
discontinuance, compromise or settlement, the court, in its discretion,
may direct that notice, by publication or otherwise, shall be given to
the members or class or classes thereof whose interests it determines
will be so affected; if notice is so directed to be given, the court may
determine which one or more of the parties to the action shall bear the
expense of giving the same, in such amount as the court shall determine
and find to be reasonable in the circumstances, and the amount of such
expense shall be awarded as special costs of the action and recoverable
in the same manner as statutory taxable costs.

(e) If the action on behalf of the corporation was successful, in
whole or in part, or if anything was received by the plaintiff or
plaintiffs or a claimant or claimants as the result of a judgment,
compromise or settlement of an action or claim, the court may award the
plaintiff or plaintiffs, claimant or claimants, reasonable expenses,
including reasonable attorney's fees, and shall direct him or them to
account to the corporation for the remainder of the proceeds so received
by him or them. This paragraph shall not apply to any judgment rendered
for the benefit of injured members or non-record owners only and limited
to a recovery of the loss or damage sustained by them.