North Carolina § 55-7-44 - Dismissal.

§ 55-7-44. Dismissal.

The court shall dismiss a derivative proceeding on motion of the corporation if one of the groups specified in subsection (b) or (f) of this section determines 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. Unless a panel is appointed pursuant to subsection (f) of this section, the inquiry and determination shall be made by: A majority vote of independent directors present at a meeting of the board of directors if the independent directors constitute a quorum; or 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. For purposes of this section, none of the following factors by itself shall cause a director to be considered not independent: The nomination or election of the director by persons who are defendants in the derivative proceeding or against whom action is demanded; The naming of the director as a defendant in the derivative proceeding or as a person against whom action is demanded; or 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. If a derivative proceeding is commenced after a determination has been made rejecting a demand by a shareholder, the complaint 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 such a motion to dismiss, the plaintiff shall be 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 such 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. If a majority of the board of directors does not consist of independent directors at the time the determination is made, the corporation shall have the burden of proving that the requirements of subsection (a) of this section have been met. If a majority of the board of directors consists of independent directors at the time the determination is made, the plaintiff shall have the burden of proving that the requirements of subsection (a) of this section have not been met. The court may appoint a panel of one or more independent persons upon motion of the corporation to make a determination whether the maintenance of the derivative proceeding is in the best interest of the corporation. The plaintiff shall have the burden of proving that the requirements of subsection (a) of this section have not been met. History (1995, c. 149, s. 1; c. 509, s. 135.2(t).) Legal Periodicals. - For recent development, "In re Wachovia Shareholders Litigation: The Case for the Common Benefit Doctrine," see 84 N.C. L. Rev. 2066 (2006).