AZ LAW BOOK

limitations will expire within the ninety days or unless irreparable injury to the corporation would result by waiting for the expiration of the ninety day period. 10-3633. Stay of proceedings 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. 10-3634. Dismissal A. A derivative proceeding shall be dismissed by the court on motion by the corporation on any legal grounds, including if one of the groups specified in subsections B or F has determined in good faith after conducting a reasonable inquiry on which its conclusions are based that the maintenance of the derivative proceeding is not in the best interests of the corporation. B. Unless a panel is appointed pursuant to subsection F, the determination in subsection A shall be made by either: 1. A majority vote of independent directors present at a meeting of the board of directors if the independent directors constitute a quorum. 2. 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 such independent directors constitute a quorum. C. None of the following shall by itself or collectively cause a director to be considered not independent for purposes of this section: 1. The nomination or election of the director by persons who are defendants in the derivative proceeding or against whom action is demanded. 2. The naming of the director as a defendant in the derivative proceeding or as a person against whom action is demanded. 3. 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. D. If a derivative proceeding is commenced after a determination has been made that rejects a demand by the complainants, the complaint shall allege with particularity facts that establish either: 1. That a majority of the board of directors did not consist of independent directors at the time the determination was made. 2. That the requirements of subsection A have not been met. E. If a majority of the board of directors does not consist of independent directors at the time the determination is made, the corporation has the burden of proving that the requirements of subsection A have been met. If a majority of the board of directors consists of independent directors at the time the determination is made, the plaintiff has the burden of proving by clear and convincing evidence that the requirements of subsection A have not been met. F. The court may appoint a panel of one or more independent persons on motion by the corporation to determine whether the maintenance of the derivative proceeding is in the best interests of the corporation. In that case, the plaintiff has the burden of proving by clear and convincing evidence that the requirements of subsection A have not been met. A person appointed by the court is not liable for a No derivative proceeding may be discontinued or settled without the court's approval. If the court determines that a proposed discontinuance or settlement will substantially affect the interests of the corporation's members or a class of members, the court shall direct that notice be given to the affected members. 10-3636. Payment of expenses On termination of the derivative proceeding the court may either: 1. Order the corporation to pay the plaintiff's reasonable expenses, including attorney fees, incurred in the proceeding if it finds that the proceeding has resulted in a substantial benefit to the corporation. determination made pursuant to this section. 10-3635. Discontinuance or settlement

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Law Book Revised 11.02.2017