§ 55-7-44. Dismissal. - North Carolina Statutes

§ 55‑7‑44. Dismissal.

(a)        The court shalldismiss a derivative proceeding on motion of the corporation if one of thegroups specified in subsection (b) or (f) of this section determines in goodfaith after conducting a reasonable inquiry upon which its conclusions arebased that the maintenance of the derivative proceeding is not in the bestinterest of the corporation.

(b)        Unless a panel isappointed pursuant to subsection (f) of this section, the inquiry anddetermination shall be made by:

(1)        A majority vote ofindependent directors present at a meeting of the board of directors if theindependent directors constitute a quorum; or

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

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

(1)        The nomination orelection of the director by persons who are defendants in the derivativeproceeding or against whom action is demanded;

(2)        The naming of thedirector as a defendant in the derivative proceeding or as a person againstwhom action is demanded; or

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

(d)        If a derivativeproceeding is commenced after a determination has been made rejecting a demandby a shareholder, the complaint shall allege with particularity factsestablishing that the requirements of subsection (a) of this section have notbeen 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 thecourt's ruling on such a motion to dismiss, the plaintiff shall be entitled todiscovery only with respect to the issues presented by the motion and only ifand to the extent that the plaintiff has alleged such facts with particularity.The preliminary discovery shall be limited solely to matters germane andnecessary to support the facts alleged with particularity relating solely tothe requirements of subsection (a) of this section.

(e)        If a majority ofthe board of directors does not consist of independent directors at the timethe determination is made, the corporation shall have the burden of provingthat the requirements of subsection (a) of this section have been met. If amajority of the board of directors consists of independent directors at thetime the determination is made, the plaintiff shall have the burden of provingthat the requirements of subsection (a) of this section have not been met.

(f)         The court mayappoint a panel of one or more independent persons upon motion of thecorporation to make a determination whether the maintenance of the derivativeproceeding is in the best interest of the corporation. The plaintiff shall havethe burden of proving that the requirements of subsection (a) of this sectionhave not been met. (1995, c. 149, s. 1; c. 509, s. 135.2(t).)