Iowa Code 490.744 – Dismissal
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1. A derivative proceeding shall be dismissed by the court on motion by the corporation if one of the groups specified in subsection 2 or 5 has determined 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 interests of the corporation. A corporation moving to dismiss on this basis shall submit in support of the motion a short and concise statement of the reasons for its determination.
Terms Used In Iowa Code 490.744
- Complaint: A written statement by the plaintiff stating the wrongs allegedly committed by the defendant.
- Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
- Discovery: Lawyers' examination, before trial, of facts and documents in possession of the opponents to help the lawyers prepare for trial.
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- following: when used by way of reference to a chapter or other part of a statute mean the next preceding or next following chapter or other part. See Iowa Code 4.1
- Plaintiff: The person who files the complaint in a civil lawsuit.
- Proceeding: includes a civil suit and criminal, administrative, and investigatory action. See Iowa Code 490.140
- Quorum: The number of legislators that must be present to do business.
- Shareholder: means a record shareholder. See Iowa Code 490.140
2. Unless a panel is appointed pursuant to subsection 5, the determination in subsection 1 shall be made by any of the following:
a. A majority vote of qualified directors present at a meeting of the board of directors if the qualified directors constitute a quorum.
b. A majority vote of a committee consisting of two or more qualified directors appointed by majority vote of qualified directors present at a meeting of the board of directors, regardless of whether such qualified directors constitute a quorum.
3. a. 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 any of the following:
(1) That a majority of the board of directors did not consist of qualified directors at the time the determination was made.
(2) That the requirements of subsection 1 have not been met.
b. All discovery and other proceedings shall be stayed during the pendency of any motion to dismiss unless the court finds upon the motion of any party that particularized discovery is necessary to preserve evidence or prevent undue prejudice to that party.
4. If a majority of the board of directors consisted of qualified directors at the time the determination was made, the plaintiff shall have the burden of proving that the requirements of subsection 1 have not been met; if not, the corporation shall have the burden of proving that the requirements of subsection 1 have been met.
5. Upon motion by the corporation, the court may appoint a panel of one or more individuals to make a determination whether the maintenance of the derivative proceeding is in the best interests of the corporation. In such case, the plaintiff shall have the burden of proving that the requirements of subsection 1 have not been met.