Title 13.1. Corporations
Chapter 10. Virginia Nonstock Corporation Act
Article 7.2. Derivative Proceedings.
§ 13.1-852.3. (Effective January 1, 2027) Standing; condition precedent; stay of proceedings.A. No member shall commence or maintain a derivative proceeding unless the member:
1. Was a member of the corporation at the time of the act or omission complained of;
2. Became a member before public disclosure and without knowledge of the act or omission complained of;
3. Was a member at the time the member made the written demand required by subdivision B 1; and
4. Fairly and adequately represents the interests of the corporation in enforcing the rights of the corporation.
B. No member shall commence a derivative proceeding until:
1. A written demand has been made on the corporation to take suitable action; and
2. Ninety days have expired from the date delivery of the written demand was made on the corporation unless (i) the member has earlier been notified that the demand has been rejected by the corporation or (ii) irreparable injury to the corporation would result by waiting for the expiration of the 90-day period.
C. If the corporation commences an inquiry into the allegations made in the demand or complaint, the court may stay any derivative proceeding for such period as the court deems appropriate.
§ 13.1-852.4. (Effective January 1, 2027) Discontinuance or settlement.A. A derivative proceeding shall not be settled or discontinued without the court's approval. If the court determines that a proposed discontinuance or settlement will substantially and adversely affect the interests of the corporation's members or a class of the corporation's members, the court shall direct that notice be given to the members affected.
B. Notice required by subsection A shall be given in such manner as the court shall determine, and the costs of such notice shall be borne in such manner as the court shall direct.
§ 13.1-852.5. (Effective January 1, 2027) Foreign corporations.Notwithstanding the provisions of §§ 13.1-852.3 and 13.1-852.6, in any derivative proceeding in the right of a foreign corporation, subject to the court's determination of whether the courts of the Commonwealth are a convenient forum for such a proceeding, the matters covered by this article shall be governed by the laws of the jurisdiction of formation of the foreign corporation except for matters covered by subsection C of § 13.1-852.3 and §§ 13.1-852.4 and 13.1-852.7.
§ 13.1-852.6. (Effective January 1, 2027) Dismissal.A. A derivative proceeding shall be dismissed by the court on motion by the corporation if one of the groups specified in subsection B or E has:
1. Conducted a review and evaluation, adequately informed in the circumstances, of the allegations made in the demand or complaint;
2. Determined in good faith on the basis of that review and evaluation that the maintenance of the derivative proceeding is not in the best interests of the corporation; and
3. Submitted in support of the motion a short and concise statement of the reasons for its determination.
B. Unless a panel is appointed pursuant to subsection E, the determination in subsection A shall be made by:
1. A majority vote of disinterested directors present at a meeting of the board of directors if the disinterested directors constitute a quorum; or
2. A majority vote of a committee consisting of two or more disinterested directors appointed by a majority vote of disinterested directors present at a meeting of the board of directors, regardless of whether such disinterested directors constituted a quorum.
C. If a derivative proceeding is commenced after a determination has been made rejecting a demand by a member, the complaint shall allege with particularity facts establishing that the requirements of subsection A or B have not been met. With respect to any allegation that the requirements of subsection A or B have not been met, the plaintiff shall be entitled to discovery if, and only with respect to, facts that are alleged in the complaint with particularity.
D. The plaintiff shall have the burden of proving that the requirements of subsection A or B have not been met, except that the corporation shall have the burden with respect to the issue of disinterestedness under subsection B if the complaint alleges with particularity facts raising a substantial question as to such disinterestedness.
E. Upon motion by the corporation, the court may appoint a panel of disinterested persons to make a determination as to whether the maintenance of the derivative proceeding is in the best interests of the corporation.
§ 13.1-852.7. (Effective January 1, 2027) Payment of and security for expenses.On termination of a derivative proceeding, the court may:
1. Order the corporation to pay the plaintiff's expenses incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the corporation; or
2. Order the plaintiff or the plaintiff's attorney to pay the corporation's or any defendant's expenses incurred in defending the proceeding if it finds that the proceeding was commenced or maintained arbitrarily, vexatiously, or not in good faith.