SECTIONS 800 - California Statutes

CORPORATIONS CODE

SECTION 800

800. (a) As used in this section, "corporation" includes an
unincorporated association; "board" includes the managing body of an
unincorporated association; "shareholder" includes a member of an
unincorporated association; and "shares" includes memberships in an
unincorporated association.
(b) No action may be instituted or maintained in right of any
domestic or foreign corporation by any holder of shares or of voting
trust certificates of the corporation unless both of the following
conditions exist:
(1) The plaintiff alleges in the complaint that plaintiff was a
shareholder, of record or beneficially, or the holder of voting trust
certificates at the time of the transaction or any part thereof of
which plaintiff complains or that plaintiff's shares or voting trust
certificates thereafter devolved upon plaintiff by operation of law
from a holder who was a holder at the time of the transaction or any
part thereof complained of; provided, that any shareholder who does
not meet these requirements may nevertheless be allowed in the
discretion of the court to maintain the action on a preliminary
showing to and determination by the court, by motion and after a
hearing, at which the court shall consider such evidence, by
affidavit or testimony, as it deems material, that (i) there is a
strong prima facie case in favor of the claim asserted on behalf of
the corporation, (ii) no other similar action has been or is likely
to be instituted, (iii) the plaintiff acquired the shares before
there was disclosure to the public or to the plaintiff of the
wrongdoing of which plaintiff complains, (iv) unless the action can
be maintained the defendant may retain a gain derived from defendant'
s willful breach of a fiduciary duty, and (v) the requested relief
will not result in unjust enrichment of the corporation or any
shareholder of the corporation; and
(2) The plaintiff alleges in the complaint with particularity
plaintiff's efforts to secure from the board such action as plaintiff
desires, or the reasons for not making such effort, and alleges
further that plaintiff has either informed the corporation or the
board in writing of the ultimate facts of each cause of action
against each defendant or delivered to the corporation or the board a
true copy of the complaint which plaintiff proposes to file.
(c) In any action referred to in subdivision (b), at any time
within 30 days after service of summons upon the corporation or upon
any defendant who is an officer or director of the corporation, or
held such office at the time of the acts complained of, the
corporation or the defendant may move the court for an order, upon
notice and hearing, requiring the plaintiff to furnish a bond as
hereinafter provided. The motion shall be based upon one or both of
the following grounds:
(1) That there is no reasonable possibility that the prosecution
of the cause of action alleged in the complaint against the moving
party will benefit the corporation or its shareholders.
(2) That the moving party, if other than the corporation, did not
participate in the transaction complained of in any capacity.
The court on application of the corporation or any defendant may,
for good cause shown, extend the 30-day period for an additional
period or periods not exceeding 60 days.
(d) At the hearing upon any motion pursuant to subdivision (c),
the court shall consider such evidence, written or oral, by witnesses
or affidavit, as may be material (1) to the ground or grounds upon
which the motion is based, or (2) to a determination of the probable
reasonable expenses, including attorneys' fees, of the corporation
and the moving party which will be incurred in the defense of the
action. If the court determines, after hearing the evidence adduced
by the parties, that the moving party has established a probability
in support of any of the grounds upon which the motion is based, the
court shall fix the amount of the bond, not to exceed fifty thousand
dollars ($50,000), to be furnished by the plaintiff for reasonable
expenses, including attorneys' fees, which may be incurred by the
moving party and the corporation in connection with the action,
including expenses for which the corporation may become liable
pursuant to Section 317. A ruling by the court on the motion shall
not be a determination of any issue in the action or of the merits
thereof. If the court, upon the motion, makes a determination that a
bond shall be furnished by the plaintiff as to any one or more
defendants, the action shall be dismissed as to the defendant or
defendants, unless the bond required by the court has been furnished
within such reasonable time as may be fixed by the court.
(e) If the plaintiff shall, either before or after a motion is
made pursuant to subdivision (c), or any order or determination
pursuant to the motion, furnish a bond in the aggregate amount of
fifty thousand dollars ($50,000) to secure the reasonable expenses of
the parties entitled to make the motion, the plaintiff has complied
with the requirements of this section and with any order for a bond
theretofore made, and any such motion then pending shall be dismissed
and no further or additional bond shall be required.
(f) If a motion is filed pursuant to subdivision (c), no pleadings
need be filed by the corporation or any other defendant and the
prosecution of the action shall be stayed until 10 days after the
motion has been disposed of.